OSLO, Oct 5 (Reuters) - Norway may tighten guidelines for spending cash from its $890 billion sovereign wealth fund, the world’s largest, Prime Minister Erna Solberg told public broadcaster NRK on Wednesday.
Changing the country’s fiscal spending rule, in place since 2001, would be a major policy departure. Until now, any suggestions of changing the rule have been rejected by successive prime ministers.
Under the current rule, governments can spend an average 4 percent of the wealth fund per year, but ultra-low global interest rates and other market conditions make it unlikely that the fund can earn returns of this magnitude, economists say.
Speaking on the eve of the government’s 2017 budget presentation, Solberg defended a surge in spending in recent years to combat rising unemployment and sluggish growth, but added the question of long-term return must be addressed.
“This is the big discussion we’re going to face: following up the question of a new, tighter rule in the time to come,” the Conservative premier said. She did not say when a decision could be made and whether it would come before or after the next general election, due in September 2017.
Despite the sharp rise in public spending, Solberg’s right-wing government aims to spend only 2.8 percent of the fund in 2016. Future spending projections show that Norway faces a big rise in pensions and health-related costs, however.
The sovereign wealth fund invests the proceeds from Norway’s revenues from oil and gas production in foreign stocks, bonds and real estate. Its value corresponds to about $170,000 for every Norwegian man, woman and child. (Reporting by Terje Solsvik; editing by Mark Heinrich)