Picture: 123RF/GALINA PESHKOVA
Picture: 123RF/GALINA PESHKOVA

Mozambique's economy faces multiple challenges, including a growing insurgency against the government and recurring extreme weather events, ratings agency S&P Global says in a research report.

S&P said militant attacks in Mozambique’s northeastern province of Cabo Delgado posed a “significant threat” to production facilities there, touted as among the biggest natural gas discoveries in the world.

Dozens of civilians were killed last month in Islamic State-linked attacks in the coastal town of Palma, near gas projects that are worth $60bn and are aimed at transforming the country’s economy.

S&P, which ranks Mozambique’s foreign debt at CCC+, seven rungs below investment grade, said it expected economic growth in the country to recover in 2021 on higher mining output, especially linked to liquefied natural gas (LNG) production.

But that rebound was subject to completion of the gas projects in the face of mounting security risks, as well as risks of droughts and flooding. Mozambique was battered by two cyclones in 2019, and another hit its shores this year.

This week French energy group Total declared force majeure on its $20bn LNG project after the insurgent attacks.

“If this project comes on stream as expected by 2024-2025, it will benefit Mozambique’s economic outlook, and support wealth levels that are very low by global comparison,” said S&P.

“But most benefits will materialise beyond our current forecast horizon as gas production is likely to come on stream in 2025 given the delays experienced in 2021.”

The ratings firm projects GDP to expand 2.5% in 2021 after 2020’s 1.25% contraction. It sees economic growth to average 5.5% from 2022 onwards. 

Reuters

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