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 sovereign wealth fund has a long investment horizon, and is among other things intended to be managed so that Norway’s petroleum wealth benefits future generations as well.
It was a net inflow to the funds capital from the government in 2019. This implies that the transactions from the fund over the government budget was smaller than net cash flow from the petroleum sector that was added to the fund during the course of the year. The net injection of capital was NOK 28.4 billion in 2019 and NOK 25.4 billion in 2018. Before 2020, only in 2016 and 2017 did we see net outflow from the fund of NOK 87.7 and 63.5 billion respectively. In 2020 it was a net outflow of NOK 301.5 billion, and for 2021 it is estimated a net outflow of NOK 117 billion.
At the end of 2021, the fund’s market value was about NOK 12 300 billion. This corresponds to three times of Norway’s GDP and exceeds NOK 2 million per registered person in Norway. Since the start, the fund has received a net inflow of NOK 2 909 billion from petroleum activities. The cumulative return from investments in equities, fixed income bonds and real estate was NOK 8 007 billion at year end 2021. The remaining market value of the fund is a result of foreign exchange gains.
The market value of the Government Pension Fund Global, 1996-2021
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 – currently estimated to 3 %. The fiscal rule also provides for petroleum revenue spending to be increased in economic downturns and decreased in economic upturns.
This ensures that petroleum revenues help to smooth fluctuations in the economy and ensure good utilisation of capacity and low unemployment. It contributes to 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.