Working Paper
Evaluating foreign direct investment in Mozambique’s natural gas industry

An economy-wide perspective

The recent discovery of large fields of natural gas in Mozambique has led to great international interest and expectations of future gains.

However, many resource-rich countries have struggled to achieve long-term sustainable growth, whether because of poor management, unequal outcomes, or political conflict. Many authors argue that this ‘resource curse’ can be avoided with the right management tools and incentives for other sectors of the economy.

We examine selected economy-wide impacts of such tools and incentives in Mozambique, using a computable general equilibrium model. Simple simulations are developed to illustrate how increased foreign direct investment might flow.

In addition, the analysis considers measures to avoid resource dependency through government grant programmes for agriculture and manufacturing. The results suggest that the gains from the production of natural gas will have positive impacts on the Mozambican economy overall, and will enable additional programmes to aid growth in other sectors.