Mozambique: Greatest risk for Mozambican economy is lack of funding for large projects

9 January 2009

Lisbon, Portugal, 9 Jan – The lack of funding for so-called “mega-projects” in Mozambique, such as the M’panda Nkua dam, due to the current financial crisis, is now the “biggest risk to the growth of the Mozambican economy,” according to economists from Portuguese bank BPI.

Amongst the projects affected, according to BPI’s regular report on economic activities in Mozambique, published Wednesday night, are M’panda Nkua, which was due to be launched at the beginning of 2009, and the extension of the power grid by 1,400 kilometres, as well as expansion of the production capacity of the Cahora Bassa Hydroelectric Dam (HCB), which implies an investment of US$1 billion.

“The projects that are expected to go ahead will be those that are already underway or that have se3cured funding,” such as construction of an oil pipeline between the port of Maputo and South Africa and the expansion of the existing gas pipeline between the two countries, the report said.

Investment in the project to mine titanium heavy minerals has been all but suspended , “due to doubts as to its economic feasibility,” as well as the construction of a refienry by multinational company Arcelor Mittal.

Despite this scenario, BPI noted, growth of Mozambique’s GDP rose by 2.1 percentage points in the second quarter of last year, to 5.3 percent, according to the latest available figures.

In terms of prices, the trend is for a rise, with inflation standing at 15.26 percent in October, after being around 16 percent in September.

“This trend for price rises is mainly due to a rise in food prices,” said BPI, which expects to see inflation fall, given the “sharp drop in energy and food prices on international markets,” related to the global recession.

According to economists from BPI, which in Mozambique is one of the main shareholders of the BCI Fomento bank, the global recession is not likely to have significant effects on investment in the country. (macauhub)