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Slide1: 

For the full conference programme, go to: http://www.centralbanking.co.uk/conferences/archv/2005/saad/programme.htm Central Banking Publications Tavistock House, Tavistock Square London WC1H 9JZ Tel: +44 (0)20 7388 0006 www.centralbanking.co.uk info@centralbanking.co.uk A paper presented at: Sovereign Asset and Debt Management: Towards pro-active, integrated management of national assets and liabilities June 20-21 2005, BMA House, London

The Norwegian Petroleum Fund: 

The Norwegian Petroleum Fund Sigbjørn Atle Berg Norges Bank Conference on Sovereign Asset and Debt Management, London, 20 June 2005

Accruals to the Petroleum Fund: Petroleum revenues minus budget deficits (billions NOK) : 

Accruals to the Petroleum Fund: Petroleum revenues minus budget deficits (billions NOK)

Stated objectives of the Petroleum Fund: 

Stated objectives of the Petroleum Fund An instrument for managing long term considerations Facilitate intergenerational distribution of petroleum revenues Protect Norway’s mainland economy from fluctuations in petroleum revenues Provide flexibility for government fiscal policy Spending only the expected real return of the Fund?

Projected growth of the Petroleum Fund, and the fund value as a share of GDP: 

Projected growth of the Petroleum Fund, and the fund value as a share of GDP Projections based on the National Budget 2005

The Petroleum Fund as a pension fund: 

The Petroleum Fund as a pension fund The government will rename the Fund as part of a State Pension Fund Together with the existing Social Security Fund The pension scheme covers the entire population and will at the outset be 30 % funded A well defined set of pension liabilities exist But no precise link is defined between fund inflows and pension liabilities

Pension payments, petroleum revenues and fund return (per cent of GDP): 

Pension payments, petroleum revenues and fund return (per cent of GDP) Net petroleum revenues Projections from the National Budget 2005 Pension payments Net petroleum revenues Return on the Petroleum Fund Inflow to the Fund = Return + Revenues

Dutch disease?: 

Dutch disease? Spending has a crowding out effect increasing in absolute terms as the Fund grows in the long term decreasing relative to GDP The stance of competitiveness of the non-sheltered industries will need to be restored in the long term restructuring costs are minimised by spending a constant portion of GDP The 4% spending rule as a compromise between minimising costs of structural change funding pension payments without large tax increases

Main points: 

Main points The Fund shelters the Norwegian economy from variations in petroleum revenues Spending of the revenues are determined as part of the budgeting process The Parliament is responsible for finding a compromise between conflicting goals Rules are needed to make sure that long term considerations are taken properly into account