Mozambique: Sovereign Fund – Management terms approved by the Government

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Mozambique: Sovereign Fund – Management terms approved by the Government

3:52 CAT | 30 Dec 2024

File photo: Noticias

The Government recently approved the terms of the management agreement for Mozambique’s Sovereign Fund (FSM), a crucial step to legitimize the Bank of Mozambique (BdM) as the operational manager of this account, which will receive revenues from natural resource exploitation.

The agreement’s drafting was led by the Ministry of Economy and Finance but required approval from the Council of Ministers before being finalized. It was initially expected that the “key ideas” of the contract would be completed in the first quarter, but the process took longer than anticipated.

The agreement establishes the terms and conditions for delegating the Government’s responsibilities to the BdM for the operational management of the FSM.

Although the law passed by the Assembly of the Republic outlines the manager’s responsibilities, the management contract provides more detailed guidance on the administrator’s role in managing this account.

In this regard, the agreement will include details about the operational manager’s mandate, functions, and responsibilities, as well as explanations regarding investment policies.

Enilde Sarmento, National Director of Economic Policies and Development at the Ministry of Economy and Finance, explained to “Notícias” during the preparation phase that the contract will guide models for accountability, investment, deadlines, and the hiring of internal managers. Recently, both the Executive and the Assembly of the Republic approved the Sovereign Fund’s investment policy and the members of its Advisory Council, respectively.

Meanwhile, although the process has yet to be finalized with the signing of the management agreement, some funds have already been channeled into the FSM’s transitional account. As of June, this account had received 7,285.74 million meticais from oil and natural gas exploration.

The transitional account is hosted at the BdM and is part of the process of creating reserves from natural resource gains, with a focus on natural gas, which is seen as the main driver of expectations.

For the first 15 years, 60% of gas revenues will be transferred to the State Budget, and 40% will go to the Sovereign Fund.

Source: Noticias