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The absence of a legal framework on revenue management reduces the impacts of the Sovereign Fund, the Civic Movement on the Sovereign Fund alleges. Unlike the IMF, the association understands that there is no guarantee of transparency.
The Mozambican parliament on December 15 approved the creation of the Sovereign Fund of Mozambique (FSM) to manage revenues from natural gas exploitation, expected to reach €5,500 million annually by the 2040s, according to government forecasts. But the opposition and civil society have doubts about the fund’s basis and management.
The fund will be managed by the central bank, the Bank of Mozambique. The Minister of Economy and Finance, Max Tonela, stated that “successful examples in the world and less good cases” were taken into account in its creation.
Even so, the Civic Movement on the Sovereign Fund points to a list of flaws in the process of creating the fund that could act to the detriment of the Mozambican people. We interviewed the coordinator of the Civic Movement, Fátima Mimbire.
DW: The IMF considers the approval of the Mozambique Sovereign Fund by parliament an “important step” towards transparent management…
DW: Is the now approved Sovereign Fund management model the most appropriate, if we consider the current circumstances in Mozambique?
FM: The model is not adjusted to the country’s reality. We as civil society, and I in particular, as leader of the Civic Movement of the Sovereign Fund and project manager of Nweti’r, had the opportunity to raise awareness regarding this issue.
Mozambique adopted an invented model, which predicts that the Sovereign Fund will hold 40% of total revenue in the first 15 years and from the 16th year onwards it will hold 50% and the remainder will go to the state budget. this means that the government probably does not want a Sovereign Fund as a revenue management mechanism, but created the Sovereign Fund just to tell the IMF, which is the godfather of the process, that it has a Sovereign Fund. Especially because the 40% of the Sovereign Fund will not be used to invest in absolutely anything, other than in capital at international level.
DW: However, the government says it looked for examples all over the world, from the successful to the less good…
FM: The government looked for examples and copied poorly, because, for example, the Ghanaian model, which seems to me [the original] from which we made an imperfect copy, was created by a revenue management law. Basically, we as Mozambique do not need a law that creates the Sovereign Fund, we need a revenue management law, [which determines] how we are going to manage revenues. This is where the State Budget mechanism eventually comes in, so it would mean that in revenue management we have the Sovereign Fund as a mechanism and then we have the state budget as another mechanism.
DW: Was a proposal made in this regard?
FM: Yes, civil society made a proposal in several discussions, several debates not only at the time with the Banco de Moçambique, then with the MEF (Ministry of Economy and Finance) which started to lead the process, with the Assembly of the Republic (parliament), through the Planning and Budget Commission, and also with the first Constitutional Affairs Commission, bodies with whom we held some engagement sessions. Hence, the problem is that the model we adopted will not effectively respond to the development goals which were to be expected. It is true that attempts were made to minimize this by, for example, investing in the part of the revenue that goes to the State Budget, for example, in infrastructure, etcetera. But the Sovereign Fund would have a greater impact if it had been institutionally framed within a revenue management law that creates the Sovereign Fund, which will house up to 10%, 20% or 30%, it would not be a problem, but with clarity about what it would be the circuit of this percentage that goes from the Sovereign Fund to later finance the budget, and so on.
DW: So, this transparency, is it not safeguarded as the IMF believes?
FM: No transparency is safeguarded, especially because some worrying areas of opacity prevail in the law, for example, when the government says it can resort to the Sovereign Fund to be able to finance the budget deficit, vis-à-vis the projections that the government does.
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