NORWAY – The head of the Norwegian central bank, Svein Gjedrem, says the Government Pension Fund – Global, the former Petroleum Fund, is now approaching the value of one year’s GDP.
“Combined with high returns, the result is that the value of the Government Pension Fund is rising rapidly and may continue to do so in the years ahead,” he said.
“The Fund is now approaching the nominal value of one year’s GDP and may reach two in the course of the next decade.”
He added it was misleading to look at the cash flow from petroleum activities as income.
“The appropriate economic perspective is to see the transfer of the cash flow to the Government Pension Fund as a way of transferring capital from one account to another – from petroleum to foreign securities.
“By doing so, we diversify risk. We are in a period marked by high oil and gas production and high prices. Substantial resources are therefore transferred from the one account to the other.
Speaking at members of the bank’s Supervisory Council last week, Gjedrem said the fund’s return “may come to finance more than 15% of government expenditure in 10 years”.
But despite this, financing large pension payments after 2012 will still “be very demanding in any event”.