Mozambique lowers gas tax revenues to the sovereign wealth fund to 40%

According to a draft of the law that has not yet been approved, 40% of the tax revenues from gas exploration in northern Mozambique will be channeled, in the first fifteen years of exploration, to the sovereign fund that the country is preparing to manage the nearly $100 billion it should receive in tax revenue.

Afterwards, the percentage rises to 50%, according to the preliminary version of the law that should be submitted to the deputies by the end of this year, which represents a variation from the idea of 2020, in which the fund would receive 50% in the first two decades, a figure that would then rise to 80% of the taxes from this sector.

Mozambique should be one of the world’s largest gas exporters as of 2024, benefiting not only from rising prices, following the invasion of Ukraine by Russia, but also from the ongoing global energy transition, which seeks to move away from fossil fuels, namely oil.

The establishment of a sovereign fund to manage revenues was one of the requirements of the International Monetary Fund to return to the country this year, following a five-year suspension of budget support after the so-called ‘hidden debt scandal’.

This sovereign fund, which is expected to follow the model implemented by several other oil and gas producing African countries such as Angola or Nigeria, will have an independent board of experts, established by the Finance Ministry, and operations will be managed by the central bank, overseen by members of parliament and an independent committee that will include members of civil society.

In the draft version reported by Bloomberg, the fund is barred from investing in oil and gas projects, and the Ministry of Finance is expected to appoint auditors to review the fund’s accounts.

The establishment of a sovereign fund to manage revenues was one of the requirements of the International Monetary Fund to return to the country this year, following a five-year suspension of budget support after the so-called ‘hidden debt scandal’.

This sovereign fund, which is expected to follow the model implemented by several other oil and gas producing African countries such as Angola or Nigeria, will have an independent board of experts, established by the Finance Ministry, and operations will be managed by the central bank, overseen by members of parliament and an independent committee that will include members of civil society.

In the draft version reported by Bloomberg, the fund is barred from investing in oil and gas projects, and the Ministry of Finance is expected to appoint auditors to review the fund’s accounts.