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Mozambique Approves Decree Regulating Sovereign Fund Law

Mozambique Approves Decree Regulating Sovereign Fund Law

On Tuesday (12), Mozambique approved the decree that regulates the Sovereign Fund Law, establishing a legal framework for the management of revenues from the country’s oil and natural gas exploration.

According to a statement from the Ministry of Economy and Finance, sent to DE, the regulation represents a significant step forward in the quest for transparency, accountability and good governance in the Natural Resources sector.

Created by Law 1/2024 of 9 January, the Mozambican Sovereign Fund aims to ensure that profits from non-renewable resources are managed responsibly, promoting sustainable socio-economic development and generating savings for future generations.

“The recently approved regulation stands out for establishing fundamental principles of transparency, accountability, legality, independence, prudence and risk management, as well as mechanisms for dealing with potential conflicts of interest. These guidelines form the pillars that will underpin the Sovereign Wealth Fund’s governance,” he said.

According to the organisation’s explanation, one of the highlights of the decree is the creation of the Supervisory Committee, an independent body made up of representatives of civil society that will be responsible for controlling and monitoring all operations related to revenues, deposits, allocation of resources and management of the Sovereign Fund.

“Its obligation to report directly to Parliament and publish its conclusions on a quarterly basis will be one of the main mechanisms for guaranteeing transparency and accountability,” he said.

The approved document also establishes the creation of an Investment Advisory Board, made up of financial experts and independent members of the government, which will act as a consultative body, assessing investment opportunities, analysing risks and monitoring the Sovereign Fund’s performance.

“The inclusion of the Investment Advisory Board with expertise and independence will be fundamental to ensuring that investment decisions are made on the basis of technical criteria and in line with the country’s interests and responds to some of the concerns raised by civil society in criticising the choice of Banco de Moçambique as the fund’s manager,” he clarified.

The governance and transparency aspects of the decree are not limited to the creation of these bodies. The regulation also establishes the obligation for independent internal and external audits of the accounts and operations, as well as the regular publication of detailed reports, including information on investments, income, profitability and risk levels.

On 8 January, the President of the Republic, Filipe Nyusi, promulgated the law creating the FSM, which was approved by Parliament on 15 December 2023.

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

“Projections indicate that annual gas exports could amount to a nominal 91.7 billion dollars over the life cycle of the project, in a scenario where all the development initiatives approved so far by the government are in operation. In this scenario, annual revenues for the state will peak in the 2040s at more than 6 billion dollars a year,” explained the Minister of Economy and Finance, Max Tonela, at the time.

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