Norway's Wealth Fund Faces Bill as Budget to Reveal Withdrawals

  • Oil fund withdrawals could top Norges Bank NOK80b estimate
  • Government adding stimulus to keep economy from recession

Norway’s wealth fund, the world’s biggest, is about to find out just how much the government aims to withdraw this year.

On Wednesday, the government will unveil a revised budget with new estimates on how much of the country’s $854 billion piggy bank will be used up during the course of 2016. The government is spending a record amount of its oil wealth to protect against a recession and pay for a wave of immigrants. (See here for historic letter for first withdrawal.)

Established in the 1990s to safeguard the financial security of future generations, Norway’s wealth fund had been left untapped until October, when the government first announced it would have to use some of its abundant oil revenue.

Initial requests for just a handful of billions of kroner have since swelled to dozens of billions. The fund has said so far it can handle the outflows with income from its bonds and real estate and dividends from its stock investments.

With oil prices still mired in the $40s, withdrawals accelerated during the first three months of the year and had already reached 20.8 billion kroner ($2.5 billion) by March.

Wednesday’s revised budget is expected to show that year-end withdrawals will now exceed the central bank’s February estimate of 80 billion kroner. Prime Minister Erna Solberg has so far been unapologetic, saying that using it was designed to be used as a backstop during difficult times.

The increased spending requirements come just as the world’s biggest sovereign wealth fund returned losses in the first quarter amid some of the most turbulent markets since the financial crisis. The fund had already reported its biggest loss in four years during the third quarter of 2015 before bouncing back at the end of the year.

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