Norway is set to withdraw $41 billion from its sovereign wealth fund to cushion the blow to the economy from the coronavirus crisis that has resulted in falling oil prices and the highest unemployment in the country in 75 years.
Known officially as the Government Pension Fund, it is the world’s biggest wealth fund, worth over $1 trillion. The government announced on Tuesday that it will have to sharply increase spending from the fund, to avoid “sharper downturn and to help healthy companies through the crisis.”
According to the Finance Ministry’s mid-year fiscal review, the revised budget calls for the use of almost 420 billion Norwegian crowns (around US$41 billion). This is almost two times higher than last year and corresponds to 4.2 percent of the fund’s total capital at the beginning of 2020.
The unprecedented cash withdrawal from the fund is beyond the self-imposed cap of three percent. It could also be the first time the government has taken considerably more than the $1 trillion fund generates in cash flow from dividends and interest payments to cover its budget deficit, according to Bloomberg.
“It’s a big bill, we are spending a lot of money, and we should be aware that if we spend more money now, it means we can spend less in the years to come,” Norway’s finance minister, Jan Tore Sanner, told state broadcaster NRK.
He added that the move is necessary to keep the Norwegian economy afloat, otherwise the country could face even more bankruptcies and even more people could lose their jobs.
The coronavirus crisis has considerably weakened the outlook for the Norwegian economy, the government said earlier in the day. Norway now has the highest registered unemployment rate in 75 years, expected to hit 5.9 percent this year.
Norway is one of western Europe’s biggest oil and gas producers, and the fund saves revenue from the lucrative sector. In 2019, it saw its greatest increase in value in a single year in the fund’s history after earning a record $180 billion.
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