Cyprus’ Parliament has approved legislation creating a National Investment Fund to manage revenue from the exploitation of the country’s hydrocarbon resources.
With a vote of 43 in favour and 7 against, the House of Representatives passed the legislative framework for the establishment and operation of the wealth fund and the Cyprus Investment Management Organization which is to manage it.
Amendments to the bill passed by DISY and AKEL prevent the Fund from being linked directly to the public debt. The description of the law indicates that the creation of the Fund must be institutionalized in a way that ensures its proper operation and performance through investments for the benefit of all Cypriots.
According to the law the “Investment Fund” should be governed by the following principals:
-The creation of an alternative steady stream of income for the State Budget, which allows for a safety margin for public finances and the economy against large fluctuations in hydrocarbon prices, with the accumulation of assets at high yield periods.
-Surpluses can be invested in international financial assets with sufficient diversification to secure future generations or other long-term goals.
-The Fund may not be used as a guarantee for borrowing by the Government. In addition, all the Republic's revenues from hydrocarbons are deposited in state coffers and, after deduction of the operating expenses, the remaining available amount will be transferred to the Fund.
A prudent and sustainable balance on outflows should be introduced between the reduction of the Government debt and the accumulation of assets for stability purposes, in accordance with the government's fiscal strategy.
The bill also provides for the establishment of an independent "Cyprus Investment Management Agency", which will primarily provide investment management services and establish and maintain a Permanent Risk Management Unit, the work of which may be outsourced.
Meanwhile, EDEK voted against the fund claiming that the law does not make clear what percentage of the proceeds from hydrocarbons will go to paying off public debt.
“We had tabled amendments regulating how natural gas revenues are to be used. An amendment that reduces the proportion of revenue that would go towards repayment of the public debt, increasing at the same time the percentage of proceeds which will flow into the fund. None of the parties that voted for the DISY amendment today supported this amendment,” said an EDEK statement.
President Nicos Anastasiades in a Tweet on Friday congratulated the House on approving the legislation for the creation of the Hydrocarbon Fund, stating that the fund will safeguard the rights of future generations and of Turkish Cypriots, by preventing outflows.
