[miningmx.com] – THE International Monetary Fund (IMF) says growing investment in Mozambique’s coal and natural gas sectors augers well for long term economic growth. However, it has warned that low commodity prices could raise short term risks.
Investment has started to flow into Mozambique over the last decade, a region long considered vulnerable to instability linked to the consequences of its long-standing civil war from 1977 to 1992.
The warring parties – the now ruling party FRELIMO, and RENAMO – have recently agreed a new peace deal, but some sporadic violent incidents and fighting talk by RENAMO’s leader Afonso Dhlakama have raised fears peace may be shaky.
As a result, the IMF has cautioned that the southern African country should at least move to address the business climate through the speedy resolution of its mining and hydrocarbon legislation.
“Ongoing progress on a broad range of structural reforms, including the passage of the new mining and hydrocarbon legislation, is encouraging,” the bank said.
“Nonetheless, further measures are needed to make poverty more responsive to growth and strengthen the business climate,’ said Min Zhu, senior executive for the IMF who concluded a team mission at the end of last month.
Zhu said “investments in large coal and natural gas projects underpin a positive medium-term outlook’, but added that “low commodity prices have increased near-term risks’.
The IMF said while structural reforms in the country had taken root, 2014 had occasioned macro-economic policy slippages and reserve losses. “Greater exchange rate flexibility’ were likely to help the economy better withstand “external shocks in the period ahead,’ it said.
Experts say developing economies could be vulnerable to sluggish global growth, weighed down by slowing public spending and declining commodity prices.
Junior miner, Xtract Resources, which is listed on London’s AIM market has been quoted as saying that it was keen to build Mozambique’s biggest gold mine, Manica, while Chinese investors are in the process of approving an increase in funding for a graphite mining project.
Xtract Resources purchased the high profile Manica gold project, previously controlled by Pan African for $12.5m and had this week raised £4.4m in a rights issue to fund the cash acquisition for the deal.
It has also set its eyes on another deposit in Mozambique that has a production value of $55m.
