A bill establishing a national investment fund, to manage future revenues from hydrocarbons, will be going to the House floor this week, some two years after it was tabled.
Lawmakers on Monday wrapped up their discussion of the government bill, although almost all opposition parties – bar Diko – said they intended to table last-minute amendments at the House plenum this coming Friday.
House finance committee chair Angelos Votsis (Diko) said the philosophy of the legislation draws on the Norwegian model.
At times where there is a need, he said, a portion of the fund would be channelled into government coffers, although the lion’s share of proceeds would be held back for investments, for future generations.
Responding to a question, the MP said the bill contains no reference to the Turkish Cypriots.
However, he added, hydrocarbons revenues would be to the benefit of all legal residents of Cyprus.
Turkish Cypriots have demanded a say in the administration of natural gas revenues, something the government rejects as long as the island remains divided.
A previous proposal floated – diverting a portion of the gas proceeds into an escrow account for Turkish Cypriots while the island remains divided – appears to have been sidelined.
Main opposition Akel is wary of the bill’s omission regarding the Turkish Cypriot community, warning of possible negative impacts on the Cyprus peace talks.
Turkey has repeatedly stated that the island’s natural resources must be shared. Northern Cyprus meanwhile has delineated an ‘Exclusive Economic Zone’ of its own, overlapping significantly with the Republic’s EEZ.
On his part, Giorgos Lillikas, leader of the Citizens Alliance, said his party is concerned about the linkage in the bill between natural gas proceeds and paying down the national debt.
As it stands, the bill stipulates that as long as the public debt is above 80 per cent of GDP, half the hydrocarbons revenue would go towards reducing this debt.
When it is below 80 per cent but above the limit of 60 per cent – set by the Maastricht criteria – only 25 per cent of revenue would go towards the public debt and the rest would be used for the creation of reserves.
These provisions, Lillikas said, will serve as an excuse for the administration to act in a fiscally irresponsible way.
“It would give any president who stands for re-election the incentive to spend public money with abandon, at the expense of future generations.”
His party will table an amendment whereby during the first 10 years of the fund’s operation, 15 per cent of revenues would go to the state budget for financing infrastructures. After the first 10 years, only 5 per cent would be diverted to the budget for infrastructure development, the rest held in reserve.
Lillikas also censured the fact that the members of the fund’s management committee would not face civil liability in the event of gross negligence.
It’s understood that during the so-called transition period – until the fund accumulates proceeds equal to a specified percentage of GDP – the Central Bank will play a significant role in the fund’s administration.
Moreover, as it stands the bill does not empower the auditor-general to check the finances of the hydrocarbons fund – although other mechanisms have been put in place.
