Speaking out: Svein Gjedrem
Norway bank boss in oil fund warning
Norway's Central Bank chief Svein Gjedrem today warned politicians and interest groups against trying to earmark parts of the country's $385 billion oil fund for specific purposes and to create a second state budget.
Commonly known as the "oil fund," the Government Pension Fund - Global is managed by the central bank and invests most of Norway's oil and gas wealth in foreign stocks and bonds to save for future generations when the black gold runs out.
The fund was set up in 1996 and now holds Nkr2.08 trillion ($385.2 billion), growing rapidly in recent years due to soaring oil and gas prices.
Some groups in Norway have suggested the fund should invest part of that wealth in companies that develop new technologies for clean energy production and for carbon capture and storage to combat global warming.
But Gjedrem told an anniversary symposium at the central bank that the fund should not be used as a source of funding for projects that do not get adequate funding in the state budget.
A Reuters report quoted Gjedrem as saying the act that established the fund did not allow for earmarking or use of the fund for purposes other than what it was created for - to preserve the value of the oil income for future generations and shield the economy from potentially destabilising inflows from the oil money.
"We see from the legislative history that the fund is not to be a second government budget, nor should it be used for spending on things that have not been given sufficiently high priority in the government budget," Gjedrem said.
"The capital markets are very efficient vehicles for channelling funds from those who save to those who invest," Gjedrem told the seminar on the 10th anniversary of Norges Bank Investment Management (NBIM), which manages the fund.
The government is allowed to spend up to 4% of the fund yearly, which is the expected real rate of return, to plug budget deficits.
"He is saying what he has to say," Finance Minister Kristin told Reuters when asked by the news agency to comment on Gjedrem's warning about against earmarking or creating a second budget out of the fund.
Halvorsen of the Socialist Left party has said that she thinks many Norwegians would support investing some of the oil money in new clean energy and environmental technology.
"Revenues from the fund go into the budget but the fund is not used as a second budget," Halvorsen told Reuters.
Halvorsen is leading a government review this year of the ethical guidelines for the fund, which will involve hearings of interested parties, including non-governmental organisations.
"I think a part of the discussion might be whether we should take a small part of pension fund to invest specifically in some markets, for instance to achieve goals in the climate sector or other environmental issues," Halvorsen said.
Halvorsen would not be drawn on whether she supported that view. She said she would not make conclusions before the discussion on the guidelines began.
Knut Kjaer, outgoing head of the fund, said that investment allocation should be left to the fund's professional managers.
"A significant part of the portfolio is already invested in such technologies, based on professional portfolio managers' assessment of values," Kjaer told Reuters.
"Having professional management of the global portfolio is better than pointing out a specific portfolio because you have some risks if you create a specific portfolio - you might buy into a market that is overvalued because everyone else is doing it," Kjaer said.