Due to domestic economic turmoil and financial crisis in the late 1980s and early 1990s, it took time before the idea of a fund was turned into actual savings. The first allocation – some USD 400 million – was not made until 1996. Since then, the Fund has grown rapidly in size. As you have already seen, the Fund’s assets are currently valued at around USD 350 billion. The Fund is expected to grow further in coming years, and may double in 5-10 years. The Fund was established as a tool to support prudent management of Norway’s petroleum wealth. One purpose is to shield the non-oil economy from price fluctuations. The Fund is also a long-term savings instrument. It will help to cope with future financial commitments linked to an ageing population. Accumulation of capital in the Fund reflects the depletion of a non-renewable resource, which is exchanged for financial assets through the Fund’s investments. By setting up the Fund, it became possible to establish a path for  2  BIS Review 58/2009  production of oil and gas that is independent of the profile for petroleum revenue spending. The alternative to a fund would have been to directly regulate production by putting a conservative upper limit on annual extraction. Furthermore, to effectively shield the non-oil economy, and to make sure that private sector investment decisions could be made independently of the public sector’s saving of petroleum wealth, the Fund is only invested abroad.
Jan F Qvigstad: The global economic crisis and its impact on Sovereign Wealth Funds – the example of Norway Speech by Mr Jan F Qvigstad, Deputy Governor of Norges Bank (Central Bank of Norway), at a meeting for financial sector representatives in Geneva hosted by the Royal Norwegian Embassy, Geneva, 11 May 2009. The text below may differ slightly from the actual presentation. *  *  *  Introduction Ambassador, Ladies and Gentlemen First, let me thank you for inviting me to this seminar for a discussion on the impact of the global economic crisis on sovereign wealth funds. Since I am the deputy governor of a central bank that manages one of the large sovereign wealth funds, I will use the Norwegian Government Pension Fund – Global as an example in my presentation. The financial and economic crisis What we are experiencing at this time is the deepest downturn in the world economy in the postwar period. The global economy will contract in 2009 for the first time in over 60 years. What is happening now is more than a normal fluctuation in the business cycle. The world is facing a crisis of confidence, with faltering faith in the future and a loss of confidence in banks, counterparties and contractual partners. The first signs of an emerging crisis in financial markets came into evidence already in early 2007, when several financial institutions in the US came under stress.