Mozambique: Has Mozambique Already Squandered Its Natural Gas Bonanza?

Mozambique has spent much of the last decade borrowing against its future. The debts are now coming due, but the natural gas that was supposed to pay for the multibillion dollar loans is yet to come online. Has the country, through its dodgy tuna bonds, over-extended itself? By SIMON ALLISON.

In the eyes of foreign investors, and its own politicians, Mozambique stopped being a poor country some time in the late 2000s – even though little had changed for the bulk of its poverty-stricken citizens.

It was around then that word of a massive offshore gas deposit began to spread, and in 2011 it became official: Mozambique was sitting on a natural gas bonanza that could radically transform the lives of its population.

It didn’t matter that it would take close to a decade to set up the infrastructure to exploit the deposit. Mozambique could start making money instantly.

By using its newfound natural resources as implied collateral, Mozambique started taking on massive, multibillion dollar loans from investors who were suddenly eager to speculate – especially with the generous returns on offer. The money taps opened, and foreign currency sloshed into the country.

A graph of Mozambique’s debt-to-GDP ratio over.

SOURCE: Daily Maverick.