Mozambique: Government pledges to wipe out its debts in 100 days
Government goes ahead with sovereign fund for development projects – Mozambique
11:56 CAT | 21 Aug 2017
The government will soon establish a sovereign fund to build reserves to finance national development projects.
The announcement was made last Friday by the Minister of Economy and Finance, Adriano Maleiane, during a lecture on fiscal consolidation, based on policies currently implemented by the government.
According to Maleiane, the reserve account will be called the National Development Fund (FND) and will have as one of its sources of financing extraordinary income such as capital gains from the sale of shares in the mineral resources sector.
“We have to create a National Development Fund. That’s what we’re thinking. The National Development Fund will finance good initiatives, but needs patient capital to start,” Maleiane said, noting that commercial banks would also have a role to play.
The measure runs contrary to the previous executive’s thoughts on the use of extraordinary revenues.
The former government was advised on several occasions to create a fund to deposit the thousands of dollars it received in capital gains from natural gas and coal, but the then finance minister argued that the country had urgent needs and could not afford the “luxury” of going down that road.
The current government sees things differently and says that all extraordinary income should be channelled into a reserve account. “This fund will be fed in the same way that the other countries feed the sovereign fund. What we are saying, as a government, is that when we receive capital gains we shouldn’t spend it, and then have adjustment problems. We are saying: let’s take advantage of the capital gains and put them in an account,” Maleiane explained.
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The FND will be managed by an autonomous institution, with the National Investment Bank\ the probable manager.
With the National Development Fund practically a certainty, the US$350 million’s-worth of business recently closed by ENI with US oil company Exxon Mobile in the Rovuma basin could be the first amounts to enter the fund.
Future of the national economy
For 2019, Maleiane plans the beginning of the consolidation of the recovery of the national economic growth, expected to enter its best phase ever in the next decade boosted by natural gas revenues from the Rovuma basin and other sources of internal growth.
According to Maleiane, the revenues that the country will collect will be at the double-digit level, making the volume of debt that is now thought a problem “a joke”. “When we have two digits, if I tell the next minister of finance that a country’s minister has been discussing 1.2 or two trillion dollars of debt for a long time, he will not even believe it, he’ll think it’s an joke, because, really, for that number, does not make much sense, ” Maleiane predicted.
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Autonomous pension fund
As part of ongoing fiscal reforms, the government says a new model for dealing with the civil servants’ Pension Fund which will ensure better predictability is being studied.
“The model we are currently using depends on the government of the day’s budget. The official has to pray every day for a generous government of the day because, in times of crisis, between paying a worker who is in active employment and one who is in retirement, it can be difficult to decide. And to avoid this need, we have to make the [pension] fund autonomous,” Maleiane explained.
The government says it is conducting studies to identify the responsibilities and funding of the foundation.
Source: O País
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