Mozambique: Sovereign fund to be supervised by parliament

Login

Register

http://www.clubofmozambique.com/

Mozambique: Sovereign fund to be supervised by parliament

2:10 CAT | 04 Nov 2020

Photo: TVM

The Bank of Mozambique yesterday gave assurances that the future Mozambican sovereign wealth fund would, in the name of transparency and accountability, be directly supervised by the Assembly of the Republic and be subject to independent audit.

Mozambique’s central bank gave its guarantee during a round table on “The analysis of the model proposal for the sovereign fund of Mozambique” promoted by the Institute for Multiparty Democracy (IDM).

“In the [technical] proposal, we opened the space for the Assembly of the Republic to create, if it so wishes, a body to directly supervise the overall management of the fund,” Bank of Mozambique director Jamal Omar said.

Under the central bank’s proposal, parliament would also have to approve the entire legal apparatus, moving away from a regulatory framework defined at governmental level.

The fund, Omar continued, would also be subject to audit by an independent entity to be designated by the Ministry of Economy and Finance, as well as by the Administrative Court (TA), whose reports would be submitted to parliament.

Omar said that the central bank would conduct the operational management of the fund under contract or delegation of functions by the Ministry of Economy and Finance [MEF], which would in turn have the task of outlining the fund’s investment policy and the supervision of its operational management.

A specialised commission would be created within the MEF to provide advice to the Minister.

“We believe that, as this is a matter of specialty at the level of the Ministry of Economy and Finance, we propose the creation of a specialised technical commission to assist the minister in decision-making or in the definition of investment policy parameters,” Omar said.

The Bank of Mozambique document foresees 50% of revenues from the exploitation of natural resources being allocated to the sovereign wealth fund and 50% to the State Budget, during the first 20 years of the fund’s operation.

In the 21st year, when revenue from natural gas projects is expected to decline, the proportion allocated to the State Budget would drop to 20% and the portion transferred to the sovereign wealth fund increase to 80%.

The Mozambican central bank advocates that the sovereign fund fulfil a double objective: the accumulation of savings, and fiscal stabilisation, given the need to face fiscal shocks resulting from the fluctuation of raw material prices in the international market.

Jamal Omar said that the fund would not be used to pay or contract debt in the revenue-generating sectors that will feed the fund itself.

Mozambique expects to receive US$96 billion (€81.4 billion) over the productive life of the Rovuma gas fields – almost seven times the current gross domestic product, according to the central bank proposal released for public debate on 12 October.

The document foresees a 20-year maturation period for the fund, after which it would contribute 4% of its balance to the State Budget. Prior to that, it would only release funds in the event of a “public calamity” or an “extreme shock” to the economy.

Source: Lusa