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Our View: More thought needed on framework for hydrocarbons fund

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THE legislature’s vote on the investment fund that will manage revenues from the island’s hydrocarbons was postponed and is scheduled to be held next week. The bill for the fund was tabled two years ago but it was forgotten until three weeks ago when at a meeting of the cabinet with the party leaders, the president asked for the approval of the bill by the legislature. The bill was discussed at the House finance committee on consecutive Mondays and amendments were proposed by the parties, however it was not taken to the plenum for the vote.

The leader of the Citizens’ Alliance, Giorgos Lillikas, said he wrote to the president asking him to undertake a dialogue with the parties regarding the bill on the hydrocarbons fund – its establishment and operation – to ensure best practices were followed so that it served the present and future of the country. He quite clearly does not believe the bill, in its current form, would serve the best interests of the people, but what guarantee is there that it would be made better through more consultations of the president with the parties, which have the opportunity to propose amendments that would improve it when it goes to the plenum?

A correct point raised by Lillikas was regarding the provision of the bill allowing for half the hydrocarbons revenue to go towards servicing the public debt if this was above 80 per cent of GDP. In the event that it was above the Maastricht-set limit of 60 per cent of GDP, then a quarter of the revenue would be used to bring down the debt. Lillikas said this provision could encourage reckless spending by an administration as it could subsequently raid the fund. It was a fair point that was also indicative of the little thought that was put into drafting the bill for the fund. Although the bill pays lip service to future generations it leaves it at the mercy of government which could use it to cover its reckless spending – reducing the high public debt it caused.

Although the parties and government like to say the fund is based on the Norwegian model, this is nothing more than rhetoric. The Norwegian model does not allow the raiding of the fund to cover profligate spending. There is plenty of time to draft a bill based on the Norwegian model that everyone pays lip service to. It is not as if the hydrocarbons revenue will start flowing in any time soon. It will take many years before this happens so why is the government and the parties in such a rush to establish the fund? We have the time to do this properly if that is what the government and the parties really want.

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