The world’s largest sovereign wealth fund sees its first few withdrawals for the first time in decades.
Norway’s Oil Fund, which amounts to $890bn (£682bn), has seen some relatively small withdrawals.
Despite the small amount withdrawn, Norwegian investment officials and concerned political figures debate on the future of the fund. It has been used beyond the time intended.
“This fund is meant to last generations and yet we are tapping it already — many, many years before we were meant to. If we keep on spending as we are and the fund can’t earn decent returns then we could end up eating into it,” says one of Norway’s leading businessman, who did not want to be named.
Fund was made through surpluses from Norway’s Petroleum Industry
The Oil Fund was made out of Norway’s surplus in the petroleum industry for a time. It had also become one of the world’s largest investors in different trades and serves as a buffer for Norway’s possible future economic troubles particularly interest rates affecting future returns.
BI Norwegian Business School Professor Espen Henriksen said the withdrawals should be seen dramatically. However, he argues that low oil prices in the world and lower expected return of profit for investors may affect the future of the fund directly.
Higher government spending is also affecting the life of fund. Norway’s government is allowed to spend up to 4 per cent of the fund each year in its budget. Due to the profit of oil and gas with the former being generated through production tax and state company dividends, the fund may see lower income than it usually has.