Daily Management Review

Central Bank of Norway fears embezzlement of reserve funds


Around 50% of the Norway National Welfare Fund’s capital will be spent over next 10 years, said Head of Norway’s Central Bank Øystein Olsen.

He expressed concern about rising costs of funds derived from oil revenues, and added that it is necessary to protect assets of the largest sovereign wealth fund in the world worth $ 890 billion.

"Growing spending of funds derived from oil revenues poses a risk of lower volume of the fund's capital. This can happen if the global recession results in falling oil revenues and low or negative profitability of the fund's capital", - he said.

This year, the government’s withdrawal from the fund could grow by 25%, after reluctant first use of the fund in 2016 to cover budgetary needs and protect the economy.

While representatives of the fund managed by the central bank claim to be able to cope with the outflow without selling assets, Olsen tries to outline the most pessimistic scenarios.

For example, according to his calculations, there is a 1% - probability in the coming 10 years that the fund will lose 50%, if annual spending remains at the level of 3% of the fund’s volume. If the expenses exceed 4%, probability of such a development will grow by about 5%. If the fund increases investment in shares to 75% from the current 60%, the probability will increase even more: about 2% and 6%, respectively.

As previously reported, Government of Norway made a proposal to increase volume of the fund’s investment in stocks from 60% to 70% to grow profits.

The move is part of a Norway National Welfare Fund’s strategy to find a new way to earn money, given extremely low level of profitability of investments in government bonds in many developed countries and fall in oil prices from $ 100 per barrel to just over $ 50 per barrel at the beginning of 2016. 

Although the proposed changes are reasonable, it is important to consider them in terms of the percentage ratio to risk, Olsen said.

Olsen made a number of key messages about state of monetary policy, confirming that most of the "pessimistic scenario" as a result of falling oil prices have not been confirmed. Fiscal costs and monetary policy played a role in saving the economy, he said. 

source: bloomberg.com

Science & Technology

Over 500 Genes Impacting Intelligence Identified By Scientists

MIT Scientists Say It Could Be Just 13 Years For Commercialization Of Nuclear Fusion

Apple patents MacBook with a keyboard screen

Vero: An Instagram killer?

Wacky Weather Causes ‘Split In The Polar Vortex’

Smart And Adaptive Artificial Eye Developed By Researchers At Harvard

NASA’s Mars Mission To Make Use Of Cold War-Era Atomic Rockets

Israel Completes Mars Habitat Simulation Experiment

Just $24 Earned By Hackers From The Huge Cryptojacking Campaign Conducted Last Week

New Molecule That Quickly Fights Cancer Cells Identified By Swedish Scientists

World Politics

World & Politics

Christine Lagarde: there’s no winner in trade wars

10 best countries for freelancers

Alarming Concerns Or Driving Force Towards Green Energy? – Bitcoin Growth Comes At Environmental Cost

Catalan authorities refuse to greet the King of Spain

Ten Top Politicians To Be Investigated By Greek Parliament On Charges Of Taking Bribes From Novartis

The cloudy future of Saudi Arabia

Australia To Welcome Britain On The Latter’s Interest In Joining TPP

South African President Zuma Finally Resigns, New President To Be Elected Soon