Georgiades who was briefing the parliamentary finance committee on the government’s plans to set up a national investment fund that will manage hydrocarbons revenue, said that while the exploitation of the Aphrodite finding is not expected to commence before 2020, the parliament should not delay the approval of the bill. The figure includes revenue from the sale of gas and non-repeating revenue such as those from licensing rounds.
“What makes its institutionalisation urgent and important now is that we send a very timely message abroad, but mainly at home that Cyprus can handle hydrocarbons revenue in a serious and responsible manner,” the Finance Minister was quoted as saying by the Cyprus NewsAgency.
Georgides said that as long Cyprus’ public debt remains above the 80% mark as a percentage of gross domestic product, up to 50% of revenue would be diverted towards reducing government debt, which last year stood at 108.9%. Public debt is expected to drop below the 100% mark by 2020, the minister added.
Cyprus which held a third round of oil and gas exploration and licensing in July and is expected to announce the winners before early 2017, wants to speed up exploratory drilling in its exclusive economic zone in order to obtain more reliable data before deciding on investment for its gas exports.
When the government debt drops to below 80% and remains above 60% of the economy, then 75% of hydrocarbons revenue “will be diverted towards the creation of reserves” and the rest will help reduce public debt, the minister said. When public debt drops below 60%, then all revenue will be diverted to the fund.
When the fund’s reserves rise to 30% of Cyprus’ economy, then the fund could divert revenue equal to 1% of gross domestic product to the government’s budget which will be used for development purposes and investment.
In the transition period until the fund contains funds equal to 3% of Cyprus’ GDP, it will invest in third country bonds and the responsibility will lie either with the Central Bank of Cyprus or an independent investment company, Georgiades said.
“When the revenue begins to flow in, it will have to be invested in government bonds such those of Germany,” Georgiades was quoted as saying.
Source: Cyprus Mail