The military instability in Cabo Delgado, northern Mozambique, is aggravating the risks associated with the investments in natural gas production in the region, Mozambique’s central bank said on Wednesday.
The situation has several economic effects for the country, including the aggravation of risks and uncertainties associated with the development of natural gas projects, the central bank said in a document with answers to questions posed by journalists.
“The increase in project security costs or the postponement of investment decisions have a high socio-economic cost for the country,” it said.
On the one hand, these security costs are recoverable, i.e. they are later deducted from the tax that must revert to the state at the production stage.
On the other hand, the delay in investing affects the viability and sense of opportunity of the projects, in a scenario where discoveries are made in other regions of the world, which may compromise the economic gains of the country – revenues, dividends, employment and others.
Of the three development plans, one, led by ExxonMobil and ENI, announced this month the postponement of the final investment decision, but due to the impact of Covid-19.
The other effects of insecurity in Cabo Delgado are the deterioration of the business environment and the restriction of the functioning of public services and the movement of people and goods in the region.
The central bank highlighted the destruction of infrastructure, generating displacement and increasing costs in the areas of defence, security and humanitarian assistance, which forces the state to give up some development projects to meet the expenses associated with the conflict.
The northern province of Mozambique is being plagued by attacks by armed groups classified as a terrorist threat, which have killed at least 500 people in the last two and a half years.
The Mozambican authorities say that 162,000 people have been affected by armed violence in that province.
At the end of March, the towns of Mocímboa da Praia and Quissanga were invaded by a group, which destroyed several infrastructures and raised its flag in a barracks of the Defence and Security Forces of Mozambique.
On the occasion, in a video distributed on the Internet, an alleged jihadist militant justified the attacks by armed groups in northern Mozambique to impose Islamic law in the region.
This was the first message issued by the perpetrators of the attacks that have taken place for two and a half years in Cabo Delgado province, recorded in one of the villages they invaded.