Mozambique Sovereign Fund receives $114 million in H1

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Mozambique Sovereign Fund receives $114 million in H1

11:32 CAT | 20 Aug 2024

FILE - These revenues were deposited in the Transitional Account based at the central bank, the Bank of Mozambique, under the terms of Article 6 of Law No. 1/2024 of 9 January, which creates the Mozambique Sovereign Fund. [File photo: Banco de Moçambique]

In the first half of this year, the Mozambican state collected $114 million (€103.3 million) in revenues from natural gas exploitation, allocated to the new Mozambique Sovereign Fund (FSM).

According to data from the Ministry of Economy and Finance’s economic and social balance sheet on the implementation of this year’s state budget from January to June, to which Lusa had access on Tuesday, these revenues include $74.1 million from 2022 and 2023, and $39.8 million from the first half of the year.

“They were deposited in the Transitional Account based at the Bank of Mozambique, under the terms of Article 6 of Law No. 1/2024 of 9 January, which creates the Sovereign Fund of Mozambique,” the document states.

Mozambique’s government has already completed all the necessary instruments to operationalise the Sovereign Wealth Fund of Mozambique, which is to be financed with revenues from gas exploitation projects, the national director of Development Studies and Policies at the Ministry of Economy and Finance, Enilde Sarmento, told Lusa on 2 April.

Sarmento explained that two of the three main instruments that were missing to make the FSM operational had already been finalised, namely the management agreement, which was to be signed between the government and the governor of the central bank, and the investment policy, as well as the fund’s regulations – which were completed and approved on 12 March.

Meanwhile, the constitution of two committees has also been finalised: the investment advisory council, whose seven members are appointed by the government, and the supervisory committee, which is to have members from civil society, and whose appointment is the responsibility of parliament.

On 15 December, Mozambique’s parliament approved the creation of the Sovereign Wealth Fund with revenues from natural gas exploitation, which are expected to reach $6 billion a year by the 2040s .

“Projections indicate that annual gas exports could amount to around 91.7 billion dollars nominally over the life cycle of the project, in a scenario where all the development initiatives approved so far by the government are in operation. In this scenario, annual revenues for the state will peak in the 2040s at more than six billion dollars a year,” explained the minister of economy and finance, Max Tonela, at the time.

On 12 March, the government estimated that the Sovereign Wealth Fund would be operational in April, following the approval of its regulations that day, as stated by the deputy minister of economy and finance, Amílcar Paia Tivane.

Tivane explained that procedures were defined for ensuring the transfer of resources associated with the exploitation of liquefied natural gas, and also revenues from the exploitation of future projects in the oil and gas area, setting the proportion at 60% for the state budget and 40% for the Sovereign Fund account for the first 15 years. From the 16th year onwards, the ratio would be 50-50.

The International Monetary Fund has already described parliament’s approval of the FSM as “an important step” in guaranteeing “transparent and solid management” of natural resources.

Source: Lusa