MOZAMBIQUE

The impact of the coronavirus will deliver a serious knock to Mozambique’s already fragile economy in 2020, while anticipated liquefied natural gas (LNG) production will be delayed by at least one year, if not far longer. Delays to the gas projects in northern Mozambique will have the indirect effect of the government further neglecting northern provinces and thus allowing a devastating insurgency to gain further ground, hold territory, and recruit more local civilians into its ranks. The neglect of the North may drag Mozambique into another civil war, after only recently concluding a peace agreement to end the 1977 to 1992 conflict. The longer-term economic consequences and the implications for debt repayment are also significant.

• The president and ruling party secured a strong mandate in 2019 elections despite serious setbacks. In 2019, the governing FRELIMO party won an insurmountable 71 percent of the total vote, ensuring its continued domination of the national assembly. President Filipe Nyusi was re-elected with 73 percent of the electorate, a larger margin than his predecessor’s record performance in 2009. On the back of his victory, Nyusi will be able to consolidate his authority over the party and government, having failed to establish his power base during his troubled first term. He may now feel more emboldened to prosecute those who are suspected of benefitting from the hidden loans.
• Swathes of Cabo Delgado province are no longer under government control. Militants are staging increasingly brazen and widespread attacks, while applying more sophisticated tactics and displaying an increasingly extensive array of hardware weaponry, most of which has been looted from captured government caches. The credibility of Islamist affiliation claimed by the insurgents remains in doubt, yet their operational capability and recruitment potential are assured. Some fighting units have infiltrated local police and government systems, while their funding is supplied by age-old smuggling networks that criss-cross the Rovuma Basin. Insurgents predominantly target civilian settlements and security interests involved in counterterrorism operations. However, both intent and operational capability to target the LNG sector is growing.
• Mozambique has lowered its forecast for economic growth this year to 2.2 percent from a previous forecast of 4 percent because of the impact of the virus and lower gas prices. Yet other projections say that the country’s economy will contract by 2.4 percent this year, with negative growth likely to the next three years. The current account deficit is set to expand to over 68 percent this year, in an alarming indication for a collapsing currency and depleting foreign exchange reserves. Collapsing prospects of gas revenues have diminished hopes that the government will be able to repay its loans. However, the government has confirmed its acceptance of restructured Eurobonds that the government restructured last year. The restructuring is being motivated by a stronger desire by the Mozambican government to reengage with the IMF, because it needs funding for its own participation in the natural gas concessions and ramp up its response to the coronavirus.