Georgiades: Natural Gas Income to Contribute Towards Reducing Public Debt

18:09 - 20 Σεπτεμβρίου 2016

Finance Minister Harris Georgiades has said that income from natural gas already discovered within Cyprus` EEZ in block 12 is estimated to be approximately €500 - €600 million per year in about 12 years, noting that any income will be used to reduce public debt and to be allocated to future generations.

Georgiades was briefing on September 19, the parliamentary committee on budgetary and financial affairs on the national investments fund, which will mange income deriving from natural gas exploitation, Cyprus News Agency reports.

He said that “while we are still a long way away from any actual income flow from the Aphrodite reserve, which is expected to start after 2020, it is necessary to pass the relevant bill in good time.”

“What makes it urgent and important for the bill to be adopted now is the need to send, both abroad but mainly at home, the very clear and timely message that Cyprus will approach the matter of managing income from hydrocarbons in a serious and responsible manner,” he pointed out.

Georgiades clarified that any estimates on the inflow of income have to do only with the reserves that have already been discovered.

According to the Finance Minister while public debt is over 80% of GDP, a percentage of up to 50% of the net income from hydrocarbons exploitation will be allocated to reduce public debt and the rest will be used to establish a reserve fund.

Right how public debt exceeds 100% of GDP, and if wise management of public finances continues, then it is projected to shrink below 100% in 2020, he added.

When public debt falls between 60 and 80% then 75% of income will be allocated to the reserve fund and the rest towards the reduction of public debt, he said.

He clarified that when public debt falls to 60% of the GDP, then the total net income from hydrocarbons will be allocated towards the fund`s reserves.

The fund, Georgiades explained, will be able to use a percentage of its income, equal to 1% of the GDP for the state budget, once reserves are at a level equal to 30% of GDP. This amount, he added, will be used for development and investment purposes.

At the same time, the Finance Minister told MPs that on the basis of a transitional provision in order for the fund to start operating, initial income will be invested in quality bonds of other states until such time as the reserves reach 3% of GDP.

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