The government recently approved the terms of the management agreement for the Mozambique Sovereign Fund (FSM), a crucial step in legitimising the Bank of Mozambique (BoM) as the operational manager of this account, which will receive revenues from the exploitation of natural resources.
According to the newspaper Noticias, the drafting of the agreement was led by the Ministry of Economy and Finance (MEF), but required approval by the Council of Ministers before being finalised, and it was initially hoped that the ‘key ideas’ of the contract would be concluded in the first quarter, but the process took longer than expected.
‘The agreement establishes the terms and conditions for delegating the government’s responsibilities to the BoM for the operational management of the FSM. Although the law approved by Parliament defines the manager’s responsibilities, the management contract provides more detailed guidelines on the administrator’s role in managing this account,’ he clarified.
Enilde Sarmento, the MEF’s National Director for Economic Policies and Development, explained that, during the preparation phase, the contract will guide models for accountability, investment, deadlines and the hiring of internal managers.
‘Although the process has not yet been finalised with the signing of the management agreement, some funds have already been channelled into the FSM’s transitional account. By June, this account had received 7.2 billion meticals from oil and gas exploration,’ he recalled.
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 FSM 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 FSM regulation establishes the procedures to ensure 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.
