“Gas exploitation must not start before Sovereign Fund approval”

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“Gas exploitation must not start before Sovereign Fund approval”

3:17 CAT | 23 Jun 2022

File photo: Notícias

Mozambican civil society organisations on Wednesday, June 22, demanded the creation of a sovereign wealth fund before the start of production of liquefied natural gas from Rovuma, to allow the revenues to be used for the social and economic development of the country.

“We are of the opinion that Mozambique cannot start exploring [natural gas from the Rovuma basin] without having a sovereign wealth fund,” said Fátima Mimbire, coordinator of the Civic Movement for the Sovereign Fund, a coalition of Mozambican civil society organisations.

Mimbire was speaking on the sidelines of a debate in Maputo four days after the first offshore exploitation platform began extracting gas from the Rovuma reserves.

Mozambique “must hurry up” and open an account for gas proceeds to be deposited in, Mimbire said.

Without a special savings mechanism, the income from the production and export of LNG would be allocated directly to the State Budget, tempting the government to increase expenditure in areas with little or no impact on social and economic development or poverty reduction, Mimbire warned.

“We have to ensure that we have a sovereign fund for the first revenues, even if they are tiny. It is possible for Mozambique to start small and build savings,” she said.

Mimbire urges that gas revenues be channelled to social sectors such as education and health, as well as to the construction of infrastructure like roads and bridges which would stimulate the transformation and diversification of the economy.

Civil society organisations are not opposed to an option presented in 2021 by the Bank of Mozambique that 50% of revenues be channelled to the state budget, but argue that a plan that clearly defines the priorities for the allocation must be drawn up.

Speaking on the same occasion on behalf of the Assembly of the Republic, the chairman of the Planning and Budget Commission (CPO), António Niquice, gave assurances that parliament would approve legislation on a possible sovereign wealth fund so that energy would be a “blessing” for Mozambique, not a “nightmare”.

“We do not want to repeat the mistakes of other countries, because we already have these examples of how things go wrong,” said António Niquice, deputy for the ruling Frelimo party, observing that the Assembly of the Republic would adopt legislation guaranteeing transparent management in the use of the proceeds for the social and economic development of the country.

Niquice said that the exploitation of natural resources should be a factor working towards peace, through the creation of employment opportunities for youth, and not conflict.

In a document released last year on a possible sovereign fund model for the country, the Bank of Mozambique admitted that the possibility of integrating civil society into account management would be “considered”, while noting that this is not common in other countries.

The Bank of Mozambique said that it would be “desirable” for the sovereign wealth fund to be constituted before the country begins to receive the revenues from the production of natural gas from the large deposits of the Rovuma basin, in time to create technical and institutional capacity for a better management of natural resources, without jeopardising macroeconomic and financial management.

The central bank expects the country to receive US$96 billion over the presumed 25 years of Rovuma gas extraction – almost seven times Mozambique’s annual gross domestic product.

Source: Diário Económico