Israel’s Sovereign Wealth Fund Expected to Delay Investments
Israel’s Sovereign Wealth Fund Expected to Delay Investments
(Bloomberg) -- Israel’s sovereign wealth fund won’t start investing internationally next year as planned, according to people familiar with the matter, a setback to government efforts to curb the strengthening shekel.
Authorities estimate the fund -- whose major revenue source is taxes on Israeli natural gas sales -- won’t reach its minimum threshold of 1 billion shekels ($286 million) to invest by then, said the people, who spoke on condition of anonymity because the discussions aren’t public. Falling oil prices and lags in the development of Israel’s biggest gas field are a chief cause for the delay, one of the people said.
The Bank of Israel manages what’s called the “The Fund for Israel’s Citizens,” created in part to counterbalance the expected surge in demand for shekels from local companies converting the proceeds of international gas sales. Last year, the central bank discontinued its program of foreign currency purchases to offset the impact of gas sales on the shekel, citing a 2020 start to the fund’s investments.
The Bank of Israel declined to say whether any delay would affect its foreign-exchange purchases.
Israel’s shekel has been the second-best performer among major currencies this year, driven in part by the expected increase in natural gas production this year. The currency’s appreciation has kept inflation below the Bank of Israel’s target range, in turn blocking increases to the country’s base lending rate, which is near a record low.
The shekel was little changed at 3.4932 to the U.S. dollar at 5:08 p.m. in Tel Aviv.
The Finance Ministry, which leads the fund’s council, declined to comment on the fund’s status.
A delay to the start of the fund’s operations “may have a limited effect on the exchange rate,” but won’t have much effect on the wider economy because the fund is focused on long-term investments, said Chen Herzog, chief economist for BDO Consulting Israel.
To contact the reporter on this story: Ivan Levingston in Tel Aviv at ilevingston@bloomberg.net
To contact the editors responsible for this story: Lin Noueihed at lnoueihed@bloomberg.net, Amy Teibel, Paul Abelsky
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