Libya's sovereign wealth fund to invest in bourse, set up budget reserve fund

CAIRO Wed May 14, 2014 12:57pm EDT

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CAIRO May 14 (Reuters) - The Libyan Investment Authority (LIA), the oil producer's sovereign wealth fund, plans to invest billions of dollars in the local stock market to help fund badly needed infrastructure projects, its new head said in a interview.

Chairman Abdulmagid Breish also said the LIA, which owns assets worth $66 billion, plans a special fund to cover future budget deficits - a timely idea as protests at oil facilities undermine public finances.

Little has been disclosed about the fund's future investment strategy since the overthrow of Muammar Gaddafi in 2011. The LIA has been busy getting released assets temporarily frozen abroad during the 2011 uprising war.

The Libyan Local Investment and Development Fund (LLIDF), jointly set up by the LIA and central bank, will boost its investment in the nascent local bourse, giving a lifeline to a tiny and illiquid market, Breish said.

The government has tried to attract foreign investors to the bourse but a lack of liquidity - some shares hardly move for days - has deterred even local firms from floating their stocks or investing there.

"The LIA wants to pass 20-30 percent of its future LLIDF investments through Libya's nascent stock exchange," Breish told the Libya Herald, a Tripoli-based online magazine, without giving numbers.

The stock market investment would benefit infrastructure projects such as a multi-billion plan for a medical city, he said.

Breish also said the LIA proposes a fund to set aside surpluses from oil exports to cover possible future budget deficits, following recommendations by the World Bank and International Monetary Fund (IMF).

"This would be a short term investment fund as it is designed to remain liquid. If the government faces a deficit in any given budgetary fiscal year it can borrow from this fund for the fiscal year in question."

Libya expects a budget deficit for this year, the second consecutive, after 10 months of protests at oilfields and ports that have reduced oil production - the country's economic lifeline - to 250,000 bpd from 1.4 million bpd in July.

The LIA was set up in 2006 under Gaddafi to manage Libya's oil dollars and diversify its economy. It has stakes in Italian bank Unicredit as well as oil and gas group Eni and is invested in shares, bonds, other financial products and holdings in subsidiaries.

Breish said the LIA had revalued its assets given the fact that no audit had been conducted since 2007. Future investments would be made through a board, not by individuals like during the Gaddafi era when decisions were sealed at the top. (Reporting by Ulf Laessing; Editing by Mark Heinrich)

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