Mozambique to regulate $91.7 billion natural gas revenue: summary

What we know

• Mozambique's council of ministers has taken a step by approving legislation governing the management of earnings from the nation's budding natural gas exports, with an estimated revenue of $91.7 billion.
• The introduction of the sovereign wealth fund legislation forms part of an economic program with the International Monetary Fund (IMF), which highlights Mozambique's commitment to addressing previous governance shortcomings, that led to international financing restrictions following a debt scandal in 2016.
• The legislation mandates the establishment of a supervision committee comprising independent members, including representatives from civil society. This committee will play a vital role in overseeing all aspects of the fund's operations, including revenue management, resource allocation, and deposit oversight.
• Furthermore, the committee's direct reporting to parliament and quarterly publication of findings aim to ensure transparency and accountability in fund management.
• Under the legislation, during the first 15 years of the fund's inception, 60% of projected gas revenue annually would be allocated to the state budget, with the remaining 40% reserved for the Sovereign Wealth Fund. Following this period, a balanced distribution model would see 50% of revenues directed to both the state budget and the sovereign fund.
• In 2022, Mozambique attained membership in the exclusive league of LNG exporters with the inaugural sale of its first shipment from a 3.4 million ton per year offshore platform. However, the nation's ambitious onshore export projects, spearheaded by industry giants like TotalEnergies SE and ExxonMobil Corp., have faced significant setbacks due to prolonged delays caused by violent campaigns waged by Islamic State-linked militants in the neighbouring province of Cabo Delgado, BNN Bloomberg reports. 
• According to Mozambique's finance ministry, the newly approved decree allocates 40% of state revenues from liquefied natural gas (LNG) exports to the sovereign wealth fund for the initial 15 years, with the remaining funds directed towards the national budget. Following this period, earnings will be evenly split between savings and annual expenditures.

What they said

Mozambique’s finance ministry said in a statement “The regulation represents a significant advance in the search for transparency, accountability, and good governance in the natural resources sector. Mozambique is laying the foundations for management based on best international practices.” Finance Minister, Max Tonela is quoted by Reuters to have said "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."