MAPUTO, The Mozambican government intends to set up a sovereign fund to create the reserves needed to finance development projects, according to the Minister of Economy and Finance, Adriano Maleiane.

The new fund, Maleiane says, will be known as the National Development Fund (FND), and one of its main sources of funding will be the capital gains tax paid on the sales of shares in the country’s mineral resources.

This is clearly a Sovereign Wealth Fund in all but name. Setting up such a fund is a break with the policies of the previous government, headed by President Armando Guebuza, which repeatedly refused to put extraordinary revenues, such as those from capital gains tax, into a special account.

Although the Guebuza government was strongly advised to set up a sovereign wealth fund, the Finance Minister of the time, Manuel Chang, always argued that the country had urgent needs which the windfall revenue from capital gains taxes should support.

Speaking during a lecture on fiscal consolidation last Friday, Maleiane said the purpose of the FND is to finance good initiatives, but which need capital to begin.

This fund will be fed in the same way that other countries feed their sovereign funds,” he added. What we, as a government, are arguing is that when we receive such added value (from capital gains), the money should not be used to increase expenditure, since we will then have adjustment problems. We are saying: ‘Let’s make use of the capital gains taxes and put them in a special account’.”

It is likely that the first money to go into the sovereign fund will by the 350 million US dollars in capital gains tax to be paid on the sale by the Italian energy company ENI to the US oil and gas giant ExxonMobil of a 25 per cent share in Area Four of the Rovuma Basin gas field. ExxonMobil bought this holding for 2.8 billion USD. Area Four contains known reserves of 85 trillion cubic feet of natural gas.

Maleiane said the FND will be managed by an autonomous institution, which is likely to be the National Investment Bank (BNI).