IMF calls Mozambique’s sovereign wealth fund ‘an important step’ towards transparent governance

The International Monetary Fund (IMF) sees parliament’s approval of Mozambique’s Sovereign Fund as an “important step” to ensure “transparent and sound management” of natural resources.

“This was an important step towards ensuring transparent and credible management of natural resource wealth,” the IMF said in a statement on Monday that it had approved the third assessment of Mozambique’s aid plan, allowing for “immediate disbursement of funds.” ” a new tranche of 60.7 million dollars (55.4 million euros) for budget support for the country.

“Further fiscal consolidation efforts are needed to reduce financing needs and contain debt vulnerabilities. Given entrenched inflation expectations, more restrictive fiscal policy and weak growth outside the mining sector, there is scope for a gradual easing of monetary policy,” the expert said. The IMF further states.

Mozambican President Filipe Nyusi promulgated the law establishing the FSM, approved in December in parliament, the republic’s presidency announced on Monday.

A statement from the President of the Republic said that the head of state “adopted and ordered the publication” of a law establishing this fund, which will be financed from revenues received from the export of natural gas.

On 15 December, the Mozambique Parliament approved the creation of the FSM, with revenues from natural gas exploration expected to reach $6 billion (€5,500 million) per year in the 2040s, despite widespread criticism from the opposition who question whether that leadership will be given to him.

The proposal to create the FSM, presented by the government, received 165 votes in favor only from the Mozambican Liberation Front (Frelimo), while 39 opposition MPs from the Mozambican National Resistance (Renamo) and the Mozambican Democratic Movement (MDM) voted against.

“Forecasts show that annual gas exports could reach about US$91.7 billion. [83,7 mil milhões de euros] nominal payments over the entire life cycle of the project in a scenario in which all development initiatives approved by the Government to date are under implementation. In this scenario, annual government revenues would peak in the 2040s at more than $6 billion per year,” Minister of Economy and Finance Max Tonela explained in parliament at the time.

The creation of the fund was discussed for several months, with the government repeatedly withdrawing the proposal from discussion in the National Assembly, citing an attempt to achieve consensus on its approval, which did not happen.

In the model for the creation of the FSM, of which the Bank of Mozambique will be the operational manager, Max Tonela said that it took into account “successful examples in the world and less successful cases” in which “countries that had great resources and were willing to meet them got into too much debt, and at this point the level of resources decreases and they enter into a conflict in which they do not have the opportunity to have more resources.”

“So that is the ultimate goal of the foundation. That is why we must look at current generations, but ensure that future generations can also take advantage of the availability of resources that exist in the country,” he explained, emphasizing that the FSM will allow “to find resources to finance the state budget in a situation where there is no longer a natural gas” for exploration.

The preamble to the proposed legislation establishing the FSM states that exploration activities carried out in Areas 1 and 4, “offshore” the Rovuma block, “have discovered vast reserves of oil and unbound natural gas.” , is estimated at approximately 180 trillion cubic feet.

Operators and partners in Zones 1 and 4 have submitted three liquefied natural gas projects to the government, which have already been approved, namely the Coral Sul FLNG offshore liquefied natural gas project, the Golfigno/Tuna liquefied natural gas project and the LNG project. natural gas price Rovuma. .