World Bank says Mozambique overruns pose a $50 billion risk – Bloomberg

The World Bank warned that Mozambique’s current economic trajectory puts $50 billion in gas projects at risk, one of the starkest warnings yet on the nation’s persistent debt-fueled overspending. The public wage bill and debt servicing consumed 87% of tax revenue last year, the Washington-based lender said in a report published on Tuesday, leaving little for anything else. At the same time, poverty levels are growing in a nation that already ranks as the world’s second-poorest, it cautioned.

The government has been counting on the gas projects to turn its fortunes around. It has relied on local debt markets to fund a fiscal deficit that the World Bank sees widening to about 6% of gross domestic product this year and next, from about 4.1% last year. That’s led to payment delays and credit-rating downgrades, and local banks limiting their participation in Treasury-bill and bond auctions.

“The cost of inaction is rising and could be severe,” the bank said in itsMozambique Economic Update.“If existing macro-fiscal pressures continue unchecked, economic instability could jeopardize more than $50 billion in foreign direct investment, particularly in energy mega projects.” TotalEnergies SE in January announced the full resumption of its $20 billion Mozambique liquefied natural gas project, after a near five-year halt because of attacks by Islamic State-aligned militants. Exxon Mobil Corp. plans an even bigger project alongside it, and the Mozambican government expects a final investment decision in the coming months.

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While the insurgent threat that forced the projects’ suspension has reduced in the northeastern Cabo Delgado province, attacks continue. Earlier this month, Rwanda threatened to withdraw its troops that have been instrumental in improving security around the gas projects since 2021. Mozambique’s economy is still reeling from protests in the wake of a disputed 2024 election that caused a 0.5% contraction last year.

The World Bank projected an expansion of 1.1% this year, and 1.8% in 2027. GDP growth will remain below the pace of population increase though 2028, it said. That means per-capita GDP will remain lower than in 2016, prolonging what the lender termed a “lost decade” through 2025.

Every year, 500,000 Mozambicans enter the labor market, but only 30,000 formal jobs are created. The World Bank also warned that Mozambique’s foreign-exchange pressures have intensified, with growing delays in accessing foreign currency through the banking system. Lenders estimate a backlog of about $800 million as of November, it said.

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