Parliament on Friday approved a bill establishing a national investment fund, to manage future revenues from hydrocarbons.
Parties eventually agreed to disconnect gas revenues from the public debt.
The original bill had included provisions stipulating that under certain fiscal conditions, 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.
The law, that passed with 44 votes for and nine against, includes an amendment tabled by ruling Disy and main opposition Akel disconnecting gas revenues from the public debt. The amendment provides that the public debt will be serviced by fund resources only if it exceeds 80 per cent of the GDP.
The text accompanying the amendment states that the aim “is to make the operation of the Fund well established and to ensure that its return on investment is to the benefit of all Cypriot people.”
The law introduces among other things, regulations on the establishment and operation of the fund, the responsibilities and tasks of its management bodies and of the competent minister in relation to the fund and its management bodies. It also provides general principles governing investment and reserves of the fund, the internal and external audit framework for the management and investment of the fund and the assurance of transparent decision-making procedures and management of the fund.
At the stage where the fund will have sufficient funds, corresponding to three per cent of the GDP at market prices, a special organisation called the “Cyprus Investment Management Organisation” (KODE) will be set up which will have the responsibility of the fund’s investment policy.
Revenue from the confirmed natural gas deposit in the Cypriot exclusive economic zone, once fully exploited, is expected to range between €500m to €600m per year over a twelve-year horizon.
The government considers that the establishment of a legal framework for the establishment and operation of the fund prior to the exploitation of hydrocarbon deposits is of particular importance as it will send a message both internally and abroad that it is approaching the issue of hydrocarbon management and revenue resulting in a responsible manner, and that such a development will assist in presenting Cyprus as a credible investment destination.