The original bill included provisions specifying that under certain economic conditions, a portion of the fund would be channeled into government reserves. The largest amount of the proceeds would be held back for investments, for future generations.
The law includes an amendment submitted by political parties, disconnecting gas revenues from the public debt. 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.” It further specifies, that fund resources will only service public debt if it exceeds 80% of the Gross Domestic Product (GDP).
Among other things, the law introduces regulations on the formation and operation of the fund, as well as management body and fund minister duties and responsibilities. Moreover, it provides general principles governing investment and fund reserves, internal and external audit framework for fund investment and management, as well as assurance of transparent decision-making procedures and fund management.
As soon as the investment fund earns sufficient funds, amounting to 3% of the national GDP at market prices, a special organization called the “Cyprus Investment Management Organization” (KODE) will be set up. KODE will be responsible for the fund’s investment policy.
Upon full exploitation, revenue from the confirmed natural gas deposits in Cyprus’s Exclusive Economic Zone (EEZ), is expected to range between €500m to €600m per annum over a 12 year time-frame.
The Cypriot government highlights the importance of structuring a legal framework to govern the establishment and operation of the national investment fund prior to the exploitation of hydrocarbon deposits. This new framework marks the beginning of hydrocarbon revenue and responsible management and presents Cyprus as a credible investment destination.