The sovereign wealth fund has a very long investment horizon, and is intended to be managed so that Norway’s petroleum wealth benefits future generations as well.
The Ministry of Finance made the first capital transfer to the Fund in 1996. Since then, the government’s net cash flow from petroleum activities has been transferred to the Fund each year.
The net cash flow from petroleum activities, less government spending, is transferred to the Fund. In 2015 this was NOK 42 billion. The Fund’s remaining income includes interest, dividends and the return on investments.
At year end, the fund’s market value was NOK 7 475 billion. This corresponds to more than twice Norway’s GDP, based on figures for the 2016 budget, or over NOK 1.3 million per person in the Norwegian population.
The market value to the Government Pension Fund Global, 1996-2015
Source: Statistics Norway, NBIM
Petroleum revenues are phased into the economy gradually in accordance with the fiscal rule that over time, government spending must not use any of the fund’s capital, only its expected real return. The fiscal rule also provides for petroleum revenue spending to be increased in bad times and decreased in good times.
This ensures that petroleum revenues help to smooth fluctuations in the economy and ensure good utilisation of capacity and low unemployment. It contributes to a high level of economic stability and predictability, which is very important for decision-makers and for society as a whole. Provided that the fiscal rule is followed, the fund’s capital will not be depleted over time, and future generations will also be able to benefit from Norway’s petroleum wealth.