Israel treasury seeking comment on plans for huge state fund for gas royalties
Under the bill, an investment committee would establish investment policy for the huge sums expected to be received by the state.
The Finance Ministry this week sought comment from other government ministries on a draft bill that would formally establish a state fund for government royalties from natural gas production.
Under the bill, an investment committee would establish investment policy for the huge sums expected to be received by the state in the coming decades from underwater natural resource exploration off Israel's Mediterranean coast.
The fund's assets would be deposited in a special account at the Bank of Israel and would be managed by a separate central bank staff.
According to estimates, gas drilling operations off Israel's coast will generate a total of $100 billion to $130 billion by 2040, of which the state would receive half. Three and a half percent of the assets in the fund would be diverted every year to the current state budget, according to the draft bill.
The bill also provides that the fund would begin operations only after NIS 2 billion in proceeds have been accumulated. Most of the proceeds are expected to be invested abroad to head off the Israeli equivalent of so-called Dutch disease. This is a reference to the circumstances that in the 1960s caused the value of the Dutch currency at the time, the guilder, to rise substantially following the discovery of vast natural gas reserves in the Netherlands. The new resources pushed up the value of the guilder and made other Dutch exports less competitive in the process.
The bill would allow the Israeli government to draw on fund assets during times of emergency. The government would be empowered to ask the Knesset for loans from the fund following a cabinet decision and after consultation with the governor of the Bank of Israel, but only in exceptional circumstances. The Knesset would also have the authority to convert the loans into grants.
According to the draft, the fund would be headed by the finance minister, who would be joined in overseeing it by a representative from the Prime Minister's Office, one from the Finance Ministry, another from the Bank of Israel and three representatives of the public.