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Norway’s wealth fund to liquidate assets due to Covid-19 impact

Hemani Sheth Mumbai | Updated on April 01, 2020 Published on April 01, 2020

The world’s biggest wealth fund, Norway’s $950 sovereign wealth fund is preparing to liquidate its asset to cover government expenses amid the coronavirus crisis in a historic move, Bloomberg reported on Monday.

The fund is planning to liquidate assets to aid government expenditure as a result of the economic impact of the coronavirus crisis in the country.

The fund’s returns have been eroded in 2020 as the Covid-19 pandemic has trashed equities, Bloomberg had reported.

The fund’s strategy of global sell-off for buying cheap stocks is no longer effective in managing the requirements. This has lead to the firm offloading a sizeable chunk of its bond portfolio, it said. The crisis is further triggered by reduced cash-flow with companies that the fund had invested as they suspendeddividends in bulk.

Norway government is facing difficulty in managing expenditure with petroleum revenue facing a sharp decline. That means it will need to withdraw historic sums from its wealth fund to make ends meet.

Earlier this month, the Norges Bank had announced that it will funnel oil revenues from its sovereign wealth fund to ease the economic impact on the country.

“The effects of the coronavirus outbreak on the Norwegian economy and the measures implemented to limit the consequences of the outbreak entail an increase in government spending and a decline in government revenues. The government must, therefore, convert an increased share of petroleum revenues into NOK currency. Norges Bank is responsible for executing these foreign exchange transactions on behalf of the government,” it had said in an official statement.

In 2019, the fund had received a cash-flow of $23 billion. The government’s expenditure during the crisis will require at least $25 billion from the fund in 2020.

If the fallout from the pandemic lasts for another couple of months it would drive the fund further towards deeper asset sales, the report added.

The Covid-19 pandemic is spelling serious trouble for economies across the globe. According to a latest report by the United Nations Conference on Trade and Development (UNCTAD), the UN trade and development body, the world economy is likely to go into recession in 2020 with a predicted loss of trillions of dollars of global income due to the pandemic.

Norway, wealth fund, coronavirus, COVID-19

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Published on April 01, 2020
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