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

Africa Finance Review

Mar 20, 2024 — 2 min read

Image Credit :Adobe Stock Images

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.

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