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Mozambique - The Sovereign Wealth Fund (SWF)

The Sovereign Wealth Fund (SWF) of Mozambique: Purpose, History, and Status

The Sovereign Wealth Fund (SWF), or Fundo Soberano de Moçambique (FSM), is a critical instrument established by the Mozambican government to manage the expected massive revenues generated from the country's vast natural resource wealth, particularly its liquefied natural gas (LNG) reserves.

The Purpose of the Sovereign Wealth Fund

The primary objectives underpinning the creation and operation of the SWF are centered on achieving macroeconomic stability, fiscal sustainability, and intergenerational equity.

1. Intergenerational Equity and Economic Development: The SWF is fundamentally designed to channel part of the nation's resource wealth into future generations. Its objectives explicitly include contributing to the country's economic and social development. By transforming finite resource income into sustainable assets, the fund aims to reinforce macroeconomic resilience and promote lasting prosperity. The creation of the SWF is seen as a necessary long-term policy tool to use the transient resource revenues to start building a diversified economy based on Mozambique's non-gas resources and the sea.

2. Fiscal Management and Stability: A core function of the FSM is to shield the economy from the volatility of commodity prices. Revenue from natural gas sales is predicted to enhance Mozambique's debt sustainability and generate funds for investment. The revenues, which the government expects will peak at more than US$6 billion annually by the 2040s, are crucial for the country's public finances and for helping to repay public debts, such as the US$900 million Eurobond that begins maturing in March 2028.

3. Governance and Anti-Corruption: Crucially, the SWF is intended to be a mechanism that ensures transparency, accountability, and sound governance in managing natural resource revenues, thereby preventing their volatile or unproductive use. The establishment of the SWF is considered an important step towards transparent management by the IMF, and it is hoped that this mechanism will safeguard the sector's profits from corruption. The fund is explicitly prohibited from being used to provide guarantees for contracting state loans, paying debts (other than associated debt repayment), or financing political party activities.

History and Legislative Foundation

The establishment of the SWF followed recommendations from international bodies, emphasizing good governance in the extractive sector.

  • Context and Recommendation: The establishment of an SWF was recommended by the World Bank to ensure the sound management and effective oversight of natural revenues. Discussions regarding the SWF were supported by the Extractive Industries Transparency Initiative (EITI).
  • Legislative Approval: The Sovereign Wealth Fund law was approved by the Mozambican Parliament in December 2023.
  • Operational Milestones: Regulations for the SWF's implementation were adopted in February 2024. The FSM was formally established in April 2024. As of late 2025, the Bank of Mozambique was advancing operational preparation for the fund's management.
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The creation of the SWF is part of the country's continued progress across its governance and fiscal structural agenda.

Current Status and Governance Structure

The Mozambican SWF (FSM) is preparing to become fully operational, built upon a clear allocation model and strict oversight mechanisms.

1. Funding and Allocation: The FSM will be underpinned by revenues derived from major LNG megaprojects in the Rovuma Basin, including the ENI-led Coral Sul FLNG (which began production in 2022), the TotalEnergies-led project (Area 1), and ExxonMobil's project (Area 4).

The fund employs a clear and defined allocation formula:

  • For the first 15 years, 40% of tax and capital gains revenue from oil and gas will be directed to the SWF.
  • The remaining 60% will be allocated to the national budget.
  • After the initial 15-year period, revenues will be split evenly, 50% for the SWF and 50% for the annual budget.
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2. Financial Status (as of late 2025): The FSM's transitional account already holds accumulated gas revenues. By October 23, 2025, this transitional account contained USD 204.5 million (€175.7 million). Furthermore, in the first quarter of the year, the sovereign fund was boosted by US$94.2 million.

3. Governance and Oversight: The fund's governance model integrates strong checks and balances to prevent misuse.

  • Policy and Operation: The Ministry of Finance acts as the policy authority for the fund. The Bank of Mozambique (BM) serves as its operational manager. A key control mechanism, the Transitory Account, will be housed at the Central Bank to ensure that revenues are accurately accounted for and managed transparently.
  • Transparency and Auditing: The design of the SWF applied the international standard known as the Santiago Principles. Oversight mechanisms include regular reporting, with a monthly report publishing the amounts received and transfers made to and from the account. Audits will be conducted by the Administrative Court as well as an independent international auditor, and the financial statements will be publicly published.
  • External Supervision: A supervisory committee, which includes members of civil society, will be established to supervise the SWF's management.
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The IMF has continued to stress the importance of ongoing capacity development, including in the operation of the Sovereign Wealth Fund, to strengthen institutional capacity and enable Mozambique to achieve its development goals.