Naisha, Kenya - Mozambique's mineral-rich economy, one of the Africa's fastest growing, will expand by 8.1 percent in 2014 and about the same in 2015, but could achieve higher growth rates if aging railways to export coal are improved, the central bank governor said.
Mozambique, a former Portuguese colony that emerged from civil war two decades ago, boasts some of the world's largest untapped coal reserves and is expected to become a key source of premium, hard coking coal used in steel making.
However, infrastructure bottlenecks have become a major headache for mining companies, with some mining projects delayed or put on hold due to the problems of getting coal to port.
Ernesto Gove said Mozambique's economy would achieve growth of 8.1 percent in 2014 even without improving railways and 8 percent in 2015.
“If we improve (the railways), we can be by far beyond this figure,” Gove told Reuters on the sidelines of a conference in Kenya.
Mozambique in December increased the estimated cost of a railway and port project to boost coal exports to $5 billion, almost twice as much as its initial projection.
Gove said annual inflation, which was 4.2 percent in 2013, was likely to increase in 2014 but would still be in line with the central bank's target of 5.6 percent.
“All the fundamentals are there and we believe that the private sector movement can create an enabling environment so that this goal can be achieved,” he said.
Mozambique has in recent years become a key country for exploration companies seeking to get a foothold in east Africa's new hydrocarbon frontier markets, with giant gas finds off its coast fuelling an exploration boom.
This has seen foreign direct investment (FDI) rise to 5.4 billion in 2013 and Gove forecast 2014 FDI inflows would be between $5 billion and $5.5 billion.
LOCAL CURRENCY DEBT
One downside of the vast investment pouring into the country, better known till now for its pristine white beaches as well as a long civil war, has been the ballooning of the current account deficit.
Gove expected it to reach 36 percent of GDP in 2014.
But he said the deficit was “not so high” if costs of building infrastructure for a nascent gas industry were excluded.
“We think by 2018/2019 we can balance the current account because our expectation for (gas) exports is very high.”
Mozambique issued a $850 million bond in 2013 but Gove said it is unlikely to issue another dollar-denominated bond in the near future despite foreign interest in high-yielding African debt.
Mozambique will instead focus on developing the local debt markets, Gove said, and is in discussions with the African Development Bank.
“We are not sure we will implement in 2014 but it's something that is in our strategy,” Gove said. - Reuters