Mozambique’s Sovereign Fund likely to be managed by National Investment Bank – FinMin

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Mozambique’s Sovereign Fund likely to be managed by National Investment Bank – FinMin

7:08 CAT | 22 Aug 2017

The Mozambican government intends to set up a sovereign fund, to create the reserves needed to finance development projects, according to the Minister of Economy and Finance, Adriano Maleiane, cited in Monday’s issue of the independent daily “O Pais”.

The new fund, Maleiane said, will be known as the National Development Fund (FND), and one of its main sources of funding will be the capital gains tax paid on the sales of shares in the country’s mineral resources.

This is clearly a Sovereign Wealth Fund in all but name. Setting up such a fund is a break with the policies of the previous government, headed by President Armando Guebuza, which repeatedly refused to put extraordinary revenues, such as those from capital gains tax, into a special account.

Although the Guebuza government was strongly advised to set up a sovereign wealth fund, the Finance Minister of the time, Manuel Chang, always argued that the country had urgent needs which the windfall revenue from capital gains taxes should support.

Speaking during a lecture on fiscal consolidation last Friday, Maleiane said the purpose of the FND “is to finance good initiatives, but which need capital to begin”.

“This fund will be fed in the same way that other countries feed their sovereign funds”, he added. “What we, as a government, are arguing is that when we receive such added value (from capital gains), the money should not be used to increase expenditure, since we will then have adjustment problems. We are saying: let’s make use of the capital gains taxes and put them in a special account”.

It is likely that the first money to go into the sovereign fund will by the 350 million US dollars in capital gains tax to be paid on the sale by the Italian energy company ENI to the US oil and gas giant ExxonMobil of a 25 per cent share in Area Four of the Rovuma Basin. ExxonMobil bought this holding for 2.8 billion dollars. Area Four contains known reserves of 85 trillion cubic feet of natural gas.

Also Read: Mozambique must ensure that gas revenues reach the population – World Bank

Also Read: Govt approves changes on tax regime and fiscal benefits for mining and petroleum operations

Maleiane said the FND will be managed by an autonomous institution, which is likely to be the National Investment Bank (BNI).

Maleiane also took the opportunity to deny claims made by the anti-corruption NGO, the Centre for Public Integrity (CIP), that the government has illicitly contracted further “hidden debts”, amounting to 100 million dollars. These debts were contracted with the Exim Bank of China, and are intended to finance the Beira Fishing Port, and the National Roads Administration (ANE).

Maleiane insisted that all the “problematic debts” have now been made public – he was referring to the over two billion dollars worth of loans contracted by three security-related companies with European banks which were illegally guaranteed by the previous government.

Also Read: Government goes ahead with sovereign fund for development projects – Mozambique

“We don’t have any hidden loans”, said Maleiane.”Everything which had to be clarified about the registration of the debt and the numbers is now clear”.

He did not know what sources CIP had used, but insisted the government had no further illicit or hidden debts.

Also Read: There are no more hidden debts – Maleiane

Also Read: CIP accuses government of taking out new ’hidden loans’

Source: AIM