Posted in Finance, Accounting and Economics Terms, Total Reads: 317
Definition: Revenue Regulation Fund
The Revenue Regulation fund is a Sovereign Wealth Fund initiated by the Algerian Government to hedge itself against the volatility of prices in gas and oil commodities. Algeria’s major exports are petroleum products and natural gas. This constitutes about two- thirds of the Algerian Government income and one- third of its GDP.
It was setup in 2000 under the official name of Fund for Regulation of Receipts (FFR). The fund gets contributions from the annual oil tax surplus. The FFR is funded by using the difference between oil price in the market and the reference price, currently $37 per barrel, which is decided by the State’s Annual Budget. In a situation of requirement, any amount can be withdrawn from the fund.
Requirement of a Revenue Regulation Fund:
As revenue of Algerian economy is mainly dependent on the quantity and price of the Oil products produced, there might be a factor of volatility involved. This might occur due to the Quantity being produced might vary every year with ambiguity and as it is a depleting resource, the resulting production might be unstable every year. The price also depends on the economic recession or booms of other countries. To hedge from these instabilities, a Regulation Fund is essential
The FFR is governed by a secretive organization and can be accessed only by subscribed investors of the country.