A recent study by the Center for Public Integrity (CIP) took a look at the debt situation of the National Hydrocarbons Company (ENH) in gas projects in Mozambique. Although the Ministry of Economy and Finance has announced a significant reduction in ENH’s debt by 2022, the study highlights concerns about the fiscal and financial implications of this debt for the country.
The CIP study points out that the transfer of ENH’s Coral South project loans to a Special Purpose Vehicle (SPV) could result in significant revenue losses for Mozambique. It is estimated that these withholding losses could range from 6.3 billion to 17.4 billion meticais, raising serious concerns about governance and transparency in the sector.
In addition, the guarantees issued by the gas consortium for the financing of the Coral Sul project could reduce Mozambique’s Corporate Income Tax revenues, highlighting the need for a more in-depth analysis of the tax implications of these transactions.
CIP also highlights the lack of transparency and clarity in the justifications for ENH’s participation in complex financial structures, raising concerns about governance and integrity in the hydrocarbons sector.
Given these concerns, the CIP study presents a series of policy recommendations to safeguard fiscal health and promote sustainable development in Mozambique. These include the need for stricter supervision of transactions involving SPVs in tax havens, improving transparency and accountability, and strengthening political frameworks to control executive power and ensure a fair distribution of resource revenues.
In addition, the study highlights the importance of evaluating tax treaties that may facilitate tax evasion and renegotiating these agreements, ensuring that multinational entities contribute fairly to the country’s tax revenues.
In short, the CIP study highlights the urgent need for measures to protect Mozambique’s finances and interests in the face of challenges related to ENH’s debt on gas projects. Implementing the recommendations presented can help ensure more transparent and responsible management of the country’s resources, thus promoting more sustainable and equitable development.
