- A country like Mozambique which is simultaneously experiencing unemployment and an external deficit could couple fiscal expansion with monetary contraction in a way that lifts aggregate demand while attracting a sufficiently large capital inflow to close the foreign payments gap.
By Cynthia R Chidhindi
The Ansar al-Sunna group have been operating in Mozambique’s Northern province Cabo Delgado since 2017 and their modus operandi includes mass beheadings, attacks on civilians, government officials and infrastructure, destroying houses and property, among other atrocities.
According to Amnesty International, a research conducted by ACLED revealed that over 1 300 civilians have died in a total of 798 organised violence events and 670 000 civilians have been internally displaced in Cabo Delgado between October 2017 and February 2021.
Buchard also asserted that the groups have routinely targeted shops, homes, farmsteads, have also kidnapped women, looted goods, conducted mass beheadings of civilians , among other unspeakable atrocities that are outlawed by international law. Economic development is divorced from natural resource endowment and this is also a major source of conflict.
Buchard also depicted that the insurgency in Mozambique was also necessitated by high unemployment rate in Cabo Delgado in contrary to the billions of investments in liquefied natural gas projects in its province. IIbid noted that Mozambique’s many gas projects have a total price tag of US 20 billion and French company Total’s US 20 billion gas project alone would be the continents’ largest ever foreign investment.
These projects are happening in a province that is plagued by economic woes, the unemployed radical youths of the Islamic faith have also used this as an opportunity to tackle economic issues in a jihadist manner.
A country like Mozambique which is simultaneously experiencing unemployment and an external deficit could couple fiscal expansion with monetary contraction in a way that lifts aggregate demand while attracting a sufficiently large capital inflow to close the foreign payments gap. Without capital mobility, however, this approach could not succeed.
Mundell went on to argue that, when capital is mobile and the exchange rate pegged, a stable policy mix requires assigning fiscal policy to internal balance and monetary policy to external balance. A new and subtle insight in this work was that dynamic stability conditions might differ for alternative policy assignments and could therefore be used to assess the appropriateness of the policy mix.
The economy of Mozambique therefore has been affected due to the insurgency that has took place in the country in which it has affected the state in terms of the economy .
The economy of Mozambique is therefore threatened since U.S. oil-and-gas company ExxonMobil, one of the largest foreign investors in the southeast African country, this week decided to delay its final decision on a major long-term investment in Mozambique’s restive Cabo Delgado region.
The impact of the insurgency therefore result Transnational crime also has serious implications for human security. It can have a damaging impact on state capacity by limiting the government’s revenue, with a resultant decline in spending on infrastructural projects and social services.
A decline in economic growth and foreign direct investment, and in tax revenue (except for windfall revenue from the sale of Anadarko and its gas extraction and liquefaction concession in Cabo Delgado to Total), and, the drop in aid allocated via budget support, which together with a cautious good governance attitude of the IMF and major bi- and multilateral cooperating partners forces government to increasingly resort to non-concessional domestic and international credit to finance its budget deficits.
The Mozambique insurgency therefore leads to the decline of demand, refinery output, available storage, and return to investment expectations in energy exploration. This may negatively affect the inclination of gas and oil majors Total and ExxonMobil to proceed with their onshore investment in Cabo Delgado as they planned which affects capital flows in the country.
Since capital flows in the country means Capital flows can be particularly volatile as the economy may experience periods of rapid growth followed by subsequent contraction. Increased capital inflows can lead to credit booms and the inflation of asset prices, which may be offset by losses due to depreciation of the currency based on exchange rates and declines in equity pricing.
- About the author: Cynthia R Chidhindi is a Masters of Politics and International Relations student at the University of Zimbabwe.
- Cynthia can be contacted on