WHAT IS THE 'National Fund For Hydrocarbon Reserves (Mauritania)'

The National Fund for Hydrocarbon Reserves is a sovereign wealth fund administered by the Banque Centrale de Mauritanie, the central bank of the North African country of Mauritania.

BREAKING DOWN 'National Fund For Hydrocarbon Reserves (Mauritania)'

The National Fund for Hydrocarbon Reserves is funded by revenues that the government receives from companies extracting oil, royalties and taxes that oil companies pay in order to operate in Mauritania, and from the profits made through the fund's investment activities.

Mauritania established the National Fund for Hydrocarbon Reserves, also known as the Fonds National des Revenues des Hydrocarbures (FNRH), in 2006. The fund seeks to create macroeconomic stability by setting aside oil and gas revenue for developmental projects. Furthermore, the FNRH also seeks to accumulate savings for future generations. The fund's management practices are considered less transparent than those of other sovereign wealth funds.

The Mauritanian government built up the fund’s assets during a period of high oil prices from 2010 to 2013. In 2011, Mauritania established another sovereign development fund known as the Deposit and Development Fund, to invest in domestic infrastructure and support financial initiatives. This fund, similar to the National Fund for Hydrocarbon Reserves, discloses very little information so its impact on the Mauritanian economy is not entirely clear.

The FNRH and Other Sovereign Wealth Funds

A sovereign wealth fund (SWF) is a pool of money derived from a country’s reserves, often set aside to benefit the country’s economy and to further investment initiatives. The money for these funds typically comes from central bank reserves that accumulate as a result of budget and trade surpluses or from revenue generated by the exports of natural resources.

For some countries, SWF’s are used to diversity revenue streams. For example, the United Arab Emirates (UAE) relies on oil exports for its wealth, and as such, the country devotes a portion of its reserves to an SWF that invests in diversified assets that protect the economy from oil-related risk. 

The China Investment Corporation (CIC) was established in 2007 with special bonds issued by the Chinese Ministry of Finance. The fund primarily targets equity, income and alternative investment strategies such as hedge funds.

Norway’s sovereign wealth fund is the largest in the world, exceeding $1 trillion in 2017, according to the World Economic Forum. Some economists worry that large SWFs could influence politics. Some large funds are not completely transparent about their corporate practices and investments, which leads some to believe they influence financial and political outcomes.

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