Friday, July 12, 2024

Mozambique approves historic law to create Sovereign Wealth Fund

On Wednesday the 13th, the Assembly of the Republic (AR) gave final approval to the Draft Law on the Economic and Social Plan and State Budget (PESOE) for 2024. The approval of this Bill was achieved through a voting process that produced the following results: Members present- 224; Abstentions- 0; Votes Against- 50; and Votes In Favor- 174.

Also yesterday, the General Assembly approved the Bill that creates the Sovereign Fund of Mozambique (FSM), an instrument that will help leverage the country’s economic and social development and stabilize the State Budget. This Bill was approved through a voting process which produced the following results: Members Present – 196; Abstentions – 0; Votes Against – 36; and Votes In Favor – 160.

Authored by the government, the document aims to counteract the volatility of oil revenues and accumulate savings for future generations, by collecting revenues from oil and natural gas exploration and those resulting from the respective investments.

The Draft Law Creating the WSF also aims to maximize the gains from the exploration and development of non-renewable natural resources, defending against the high volatility that characterizes their international prices and with the primary objective of benefiting present and future generations.

Article 5(1) of this Bill explains that “WSF revenues are those from the production of liquefied natural gas from Areas 1 and 4 Offshore of the Rovuma Basin and future projects for the development and production of oil and natural gas and the return on investment of WSF revenues”.

Paragraph 2 of the same article explains that “the tax base for calculating WSF revenues includes gross tax revenue from the exploitation of petroleum resources, namely, Petroleum Production Tax and Corporate Income Tax, including that resulting from the taxation of capital gains, production bonuses, under the terms to be regulated and production sharing from Profit Oil, under the terms to be regulated”.

“In its governance structure, it is intended that the Sovereign Fund will make full use of the existing institutions in the country, guided by the principles of good governance, transparency, accountability, independence and inclusion, in line with international best practices as stated in the generally accepted principles and practices 2008-GAPP 2028 (Santiago principles),” reads the government’s statement of reasons.

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