Mozambique lawmakers back creation of sovereign wealth fund

MAPUTO (Reuters) – Mozambique lawmakers on Wednesday backed the creation of a sovereign wealth fund, which the government of the gas-rich country wants to use to harness receipts from liquefied natural gas (LNG) exports.

The southern African country started exporting LNG in November last year, with projects by international energy companies such as Eni and TotalEnergies expected to dramatically lift its annual economic output of just $16 billion currently.

Introducing a bill to establish the fund, finance minister Max Tonela said government projections showed that at their peak in the 2040s state coffers stood to receive more than $6 billion a year from gas exports.

“The importance of the Sovereign Wealth Fund lies in the need to ensure that these revenues are used in a sustainable way to drive long-term economic development,” Tonela said.

Eni started exports from its Coral Sul offshore LNG platform roughly a year ago and hopes to reach a final investment decision on its second floating project in Mozambique by the end of June next year, two sources told Reuters in October.

TotalEnergies has said it would like to restart its onshore project before the end of this year, but that is looking unlikely as a funding review of the mega project stalled by violent protests remains unresolved thus far.

Mozambique is slowly rebuilding confidence in its economy after a 2016 “hidden debt” scandal that prompted donors to cut off aid and sparked a currency collapse and debt crisis.

Tonela said the sovereign fund would be guided by the principles of good governance, transparency and accountability.

He said the government’s proposal would mean that during the first 15 years of the fund’s establishment, 60% of the projected gas revenue for each year would be transferred to the state and 40% reserved for the fund.

After the fifteenth year, 50% of projected revenues will be allocated to the state budget and 50% to the sovereign fund.

(Reporting by Manuel Mucari and Wendell Roelf; Editing by Alexander Winning and Mark Potter)