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Sovereign Wealth Fund: Investment Policy Approved to Improve Long-Term Asset Management

Sovereign Wealth Fund: Investment Policy Approved to Improve Long-Term Asset Management

On Tuesday 10 December, during the 36th ordinary session of the Council of Ministers, the government approved an Investment Policy for the Mozambique Sovereign Fund (SWF). This is a set of guidelines and measures aimed at guiding the long-term management of assets.

‘In addition to the reference duration for the investment of SWF resources and the permitted deviation margins, the Investment Policy also establishes the acceptable credit risk limits for the management of SWF assets, including markets, issuers, instruments, counterparties and investment maturities,’ explained the government in a statement.

In the document, the government explained that the new measure will also help to define the eligible countries and currencies to be applied in natural resource exploitation projects, whose earnings will be directed to the WSF, as well as safeguarding the criteria for valuing the investment portfolio.

In November, the Ministry of Economy and Finance (MEF) announced that in the first nine months of this year the state collected a total of 8.5 billion meticals (134.6 million dollars) in revenue from oil and natural gas exploration. This money was invested in the newly created Mozambique Sovereign Fund (FSM).

‘The amounts were deposited in the Transitory Account at the Bank of Mozambique, as established by Article 6 of Law No. 1/2024, of 9 January, establishing the Sovereign Fund of Mozambique,’ the MEF document said.

Parliament approved the creation of the Fund on 15 December last year, establishing that it would be made up of revenues from natural gas exploration, which by the 2040s could reach 379 billion meticals (6 billion dollars) a year.

On 12 March, the government estimated that the SWF would be operational in April, after the regulation was approved that same day, according to the Deputy Minister of Economy and Finance, Amílcar Tivane.

‘Projections indicate that annual gas exports could amount to around 5.8 billion meticals (89.9 million dollars) over the life cycle of the project, if all the development initiatives approved so far are in operation. In this scenario, annual revenues for the state should peak in the 2040s, exceeding 6 billion dollars a year,’ said the Minister of Economy and Finance, Max Tonela.

In addition, the WSF regulation establishes the procedures for ensuring the transfer of resources from the exploitation of liquefied natural gas, as well as from future oil and gas projects. For the first 15 years, 60 per cent of revenues will be allocated to the State Budget and 40 per cent to the Sovereign Fund. From the 16th year onwards, the distribution will be equal (50/50).

The International Monetary Fund (IMF) previously considered the creation of the GSF to be ‘an important step’ in ensuring ‘transparent and sound management’ of natural resources.

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