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It was created after the discovery in 1969/ How Norway's "Oil Fund" works

2023-08-24 13:59:00, Blog CNA

It was created after the discovery in 1969/ How Norway's "Oil

The Global Government Pension Fund was created after Norway discovered oil in the North Sea. The fund was created to protect the economy from fluctuations in oil revenues. It also serves as a financial reserve and a long-term savings plan so that Norway's current and future generations can benefit from the oil wealth.

In 1969, one of the world's largest offshore oil deposits was discovered in Norway. Suddenly, the Nordic country had a lot of oil to sell and its economy grew dramatically.

Early on, it was decided that oil and gas revenues should be used carefully to avoid imbalances in the economy. In 1990, the Norwegian parliament passed legislation to support this idea, creating what is now the Global Government Pension Fund, and the first money was deposited into the fund in 1996. As the name suggests, it was decided that the fund would only invest abroad country.

Oil revenues have been very important to Norway, but one day the oil will run out. The purpose of the fund is to ensure that that money is used responsibly, and thus protect the future of the Norwegian economy.

How does the fund grow?

It was created after the discovery in 1969/ How Norway's "Oil

Although revenues from oil and gas production are transferred to the fund, these deposits account for less than half of its value. Much has been earned by investing in stocks, fixed income, real estate and renewable energy infrastructure.

Today, it is one of the largest funds in the world, owning almost 1.5 percent of all shares in companies listed on the world stock exchange. This means that the Fund has shares in around 9,000 companies worldwide, giving it the right to a small share of their profits each year.

In addition, the fund owns hundreds of buildings in some of the world's major cities, which generate rental income.

The fund also receives a steady flow of income from lending to various countries and companies. By spreading the investments widely, the risk of losing the fund's money is reduced.

How are the savings spent?

It was created after the discovery in 1969/ How Norway's "Oil

Each year, the Norwegian government can only spend a small part of the fund, but this is still almost 20 percent of the government budget.

There is a broad political consensus on how the fund should be managed. The less it spends today, the better positioned Norway will be to weather economic downturns and crises in the future.

Budget surpluses go to the fund, while deficits are covered with money from the fund. In other words, authorities can spend more in bad times and less in good times.

In order for the fund to benefit as many people as possible in the future, politicians have agreed on a fiscal rule that ensures that no more is spent than the expected income in the fund.

On average, the government only has to spend the equivalent of real income into the fund, which is estimated to be about 3 percent a year. In this way, oil revenues gradually flow into the economy. At the same time, only the annual income of the fund is spent, and not its capital.

The role of the fund is to ensure that the national wealth lasts as long as possible. Its investments have an extremely long-term perspective, enabling it to withstand large fluctuations in value in the short term./ Bota.al