Rich in Resources: Norway, Australia, Canada and More
Norway's Oil Fund
How Norway saved its oil wealth in the world's largest sovereign wealth fund, the rule that limits spending, and how the fund invests ethically.
When Norway discovered oil in the North Sea in 1969, it was a modest economy. Today it is one of the world’s richest countries per person, partly because of how it managed its oil wealth.
The fund
In 1990, Norway created what became the Government Pension Fund Global, often called the oil fund. Oil and gas revenues flow into the fund, which invests abroad in stocks, bonds, property and renewable energy.
It grew into the world’s largest sovereign wealth fund, worth well over 1.5 trillion dollars, owning a small share of thousands of companies worldwide.
The fiscal rule
The government can spend only about the expected real return on the fund each year, set at around 3 percent since 2017 (4 percent earlier). This means:
- Oil wealth benefits future generations too.
- Spending doesn’t swing wildly with oil prices.
- The economy avoids overheating during booms.
Investing abroad
Investing outside Norway:
- Avoids pushing up the krone and hurting other industries (Dutch disease).
- Diversifies away from oil.
Ethical guidelines
The fund excludes companies involved in certain weapons, tobacco and serious environmental or human rights harms, based on advice from an ethics council.
Why it worked
Norway had strong democratic institutions, a tradition of consensus and broad public support for saving.
When oil prices soar, some politicians want to spend more on public projects. Under the fiscal rule, they can only draw about 3 percent of the fund, keeping most of the windfall saved.
Norway saves oil revenue in its fund and spends only about the expected real return.
- Norway created its oil fund in 1990.
- It became the world's largest sovereign wealth fund.
- A fiscal rule limits spending to about 3 percent of the fund.
- Investing abroad avoids Dutch disease and diversifies wealth.
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