Why Mozambique's new Sovereign Wealth Fund is a big deal.

Mozambique's council of ministers recently approved creating the country's new sovereign wealth fund legislation.

Why is this important: Most African countries are creating sovereign wealth funds to manage the monetisation of their natural resources. In Mozambique's case, the gas-rich discoveries of up to 150tr cubic feet (tcf) will make the nation one of Africa's largest suppliers of LNG. The size of the findings could lead to export receipts of more than $6 billion a year.

In the Numbers: Mozambique's debt-to-GDP ratio is approximately 92 per cent, with an inflation rate averaging 6.5 per cent. In 2022, the country signed a three-year agreement for a $456 million Extended Credit Facility (ECF) with the IMF. It has benefitted from concessional public external debt, which has reduced its cost of servicing its debt.

The bottom line: The prospect of Mozambique's sovereign wealth fund presents the nation with a unique position to deliver economic value to its citizens. This can be achieved with the correct governance and investing structure. This ensures transparency that increases co-investing opportunities and creates a funding transformation to decrease the nation's debt burden.

Further Reading :

Mozambique to Establish Sovereign Wealth Fund.

Mozambique is to join other African countries to create a sovereign wealth fund using revenues from its LNG exports. According to the country’s finance minister, projections showed that at their peak in the 2040s, the state is expected to receive more than $6 billion a year from gas exports. Why

Africa Finance ReviewAfrica Finance Review

The Rise of African Sovereign Wealth Funds

Africa Sovereign Wealth Funds (SWF) have grown since the first one Botswana’s Pula Fund was established in 1994, with the total assets managed by African SWFs rising to US$ 97.9 billion. State governments continue to create these special-purpose investment funds using revenue from mineral resource exports, government finances

Africa Finance ReviewAfrica Finance Review

Thanks for reading the Africa Finance Review. Please send us your feedback, news or suggestions to info@africafinancereview.com. Please ask your friends and colleagues to subscribe.