World Bank Upbeat on Mozambique Growth

The World Bank, in an update released on January 30, expressed optimism about Mozambique's economic prospects from this year on. It said that work on the two huge LNG projects that start in earnest this year will help drive growth.
And less cheerfully, the report adds that the ongoing reconstruction work after two cyclones that hit central Mozambique early last year, killing some 640 people, will also contribute.

The United Nations estimates that the first cyclone damaged infrastructure worth $1.4bn and resulted in losses amounting to $1.39bn. The cost of recovery and reconstruction is $2.9bn. The second cyclone raised the recovery needs to $3.2bn. Largely because of the disasters, Mozambique's economy slowed to 2.3% growth in 2019, according to the World Bank report.

"So, having put much of the past economic volatility behind," it said, "structural reforms for more sustainable and inclusive growth must return to the centre of the agenda, with the objective of recovering from the recent cyclones in the short-term and, in the medium term, of using the LNG opportunity to produce, export and employ."

In June 2019, US company Anadarko Petroleum sanctioned a $20bn LNG project in northern Mozambique. The onshore facility, whose building is now led by French major Total after an ownership change months after sanction, will initially consist of two LNG trains with a nameplate capacity of 12.88mn metric tons/yr, drawing feed gas from giant offshore reserves.

Another US giant, Exxon Mobil which is leading a separate consortium will reportedly make final investment decision on its $30bn LNG project in Mozambique mid this year.

The projects are billed to start producing in the next five years, which will bring in revenue. Last year, the government collected $880mn in capital gains tax from the sale of assets between LNG operators. From the early 2030s, Total's venture alone will contribute $3bn/yr to the state treasury.

Although the LNG investments would be economically important going forward, the World Bank cautions that if revenues are poorly managed, the country might miss benefits from its 180 trillion ft³ resource. Anticipated foreign currency inflows from LNG development to production stages could potentially over-strengthen the local currency, compromising export competitiveness.

"Managing these risks requires a battery of policies and instruments including a credible medium-term fiscal framework anchored in appropriate fiscal targets and a sovereign fund for saving and smoothing volatility," the World Bank says.