Mozambique’s World-Topping Currency Shrugs Off Gas-Project Raid

MAPUTO (Capital Markets in Africa) — A deadly raid by insurgents that stopped work at a gas project that Mozambique depends on for an economic revival has done little to derail a world-beating rally in the country’s currency.

The metical has appreciated 14% against the dollar since the beginning of February, making it the world’s best performing currency in the period. And its stellar run isn’t over yet, according to Rand Merchant Bank’s Johannesburg-based analysts Neville Mandimika and Daniel Kavishe.

“Given the excess dollar liquidity in the market, as aggregate mining activity gains traction, we expect the metical to strengthen,” they said in a a note Tuesday. “We expect the central bank to allow for further build-up in dollar liquidity, which will see the currency strengthen even further, in order to counter the effects of import inflation.”

Total SE evacuated workers from its $20 billion liquefied natural-gas project in Mozambique’s Cabo Delgado province last month for the second time this year, following an attack on a nearby town that houses many contractors. The company hasn’t given a date by which it’ll resume work on the project, that was scheduled to start exporting the fuel in 2024.

Mozambique’s currency has appreciated even as its dollar bonds fell to the lowest since June, with yields spiking to 10.7%. The International Monetary Fund on Monday cut its economic-growth forecast for Mozambique to 1.6% this year, from 2.1% it had predicted in October.

Source: Bloomberg Business News