Abdullah Al-Hassan, head of the IMF team, told the House finance committee that gross revenues from the sale of hydrocarbons would be channelled into this fund to help stabilise the economy, reduce public debt and benefit future generations. IMF external expert Martin Skancke, a Norwegian sovereign wealth fund and asset-management expert, told Cypriot MPs that an investment management company would run the fund.
The fund’s establishment provided for three stages, Skancke said: the first phase relates to raising capital, the second focuses on the rapid reduction of public debt, and the third aims at determining the regulations under which the fund would cover the public deficit. According to Skancke, the Hydrocarbons Fund would be permanent with “a long-standing investment horizon”. He said the law would spell out the qualifications of the directors of the fund’s management entity, as well as the appointment procedures for the directors. It would also lay out in detail the regulations for the company’s audit and transparency to ensure sound corporate governance.
The Norwegian expert said that information with regard to the operation of the fund would be available to the public, while an independent council would report to the finance ministry, which would then brief parliament. The main challenge, said Skancke, is to use revenues from natural gas and oil exploration with a view to boost living standards, warning that other countries have experienced over-consumption and inflation as a result of poor management of similar funds.
Revenues from hydrocarbons should be integrated into the state budget, Skancke stressed. He went on to cite the example of Norway’s sovereign wealth fund, politicians can spend at their discretion only the return on capital from the investment fund, which in Norway’s case stands at around 4%. The establishment of a resource fund for hydrocarbons is one of the commitments undertaken by Cyprus in its bailout agreement with international lenders.
Chairman of the House finance committee Nicolas Papadopoulos later told reporters that “IMF experts have warned us that it does not mean that a country with hydrocarbons resources has no financial problems.”
Source: Cyprus Mail
