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Mozambique Lawmakers Approve Establishment of Sovereign Wealth Fund to Harness LNG Export Receipts

© AP Photo / Schalk van ZuydamAn old man holds Mozambican flag as people wait for the arrival of India's Prime Minister Narendra Modi at a technical school in Maluana, Mozambique, Thursday, July 7, 2016
An old man holds Mozambican flag as people wait for the arrival of India's Prime Minister Narendra Modi at a technical school in Maluana, Mozambique, Thursday, July 7, 2016 - Sputnik Africa, 1920, 14.12.2023
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In November 2022, Mozambique commenced its LNG exports, signaling a new era for the country. International energy giants such as Eni, an Italian energy company, and TotalEnergies, a French energy and petroleum company, have spearheaded projects that are expected to substantially elevate the country's current annual economic output of $16 billion.
Lawmakers in Mozambique have backed the creation of a sovereign wealth fund to manage revenues from liquefied natural gas (LNG) exports in the gas-rich southern African country. The decision is in line with the government's vision to capitalize on the revenues generated by the country's substantial LNG exports.
Presenting the bill to establish the fund, Mozambican Finance Minister Max Tonela highlighted the government's projections, noting that at the peak of gas exports in the 2040s, government coffers could potentially receive more than $6 billion annually.

"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 told lawmakers.

Eni began exports from its Coral Sul offshore LNG platform about a year ago and aims to reach a final investment decision on its second floating project in the southern African country by the end of June 2024, Western media reported in October.
Solar panels are used to generate electricity at the Greenpeace exhibit during the climate change conference in Durban, South Africa, Tuesday, Nov 29, 2011.  - Sputnik Africa, 1920, 05.12.2023
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Meanwhile, TotalEnergies has expressed its intention to restart its onshore project before the end of this year. However, the financing review of the mega-project has been hampered by unresolved issues stemming from violent protests over the results of local elections.
Mozambique is gradually restoring confidence in its economy after a "hidden debt" scandal in 2016 led to the suspension of aid by donors, triggering a currency collapse and debt crisis. Minister Tonela assured that the sovereign fund would be guided by the principles of good governance, transparency and accountability.
According to the government's proposal, during the first 15 years of the fund's existence, 60% of the projected gas revenues for each year would go to the state, while 40% would be reserved for the fund.
Subsequently, after the fifteenth year, 50% of the projected revenues will be allocated to the state budget and the remaining 50% will be allocated to the sovereign fund. This deliberate allocation strategy aims to prudently manage and allocate the expected LNG revenues to ensure both immediate benefits and long-term sustainable development.
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