Foreign exchange purchases for GPFG

The Ministry of Finance has given Norges Bank responsibility for the monthly transfers to the GPFG. The transfers are in foreign currency, since the funds in the GPFG are to be invested in their entirety abroad. Most of the SDFI's revenues are in foreign exchange, which is then purchased by Norges Bank. Normally there is a need for additional foreign exchange to cover the transfers to the GPFG. Norges Bank purchases this foreign exchange in the market. In somewhat simplified terms, Norges Bank exchanges the government's NOK-denominated petroleum revenues, less the non-oil budget deficit, for foreign exchange, before transferring the funds to the investment portfolio of the GPFG.

Norges Bank's foreign exchange purchases for the GPFG take place on a daily basis during the months in which there is a need to purchase foreign exchange. The daily purchases are determined for one month at a time and are announced in a press release on the last business day of the preceding month.

Revenues from the SDFI and the foreign exchange Norges Bank purchases in the market are held in a foreign exchange portfolio at Norges Bank referred to as the petrobuffer, or buffer portfolio. The monthly transfers to the GPFG are taken from this portfolio. Estimates for the government's petroleum revenues and the non-oil budget deficit can change substantially through the year. The changes will affect the allocations to the GPFG and thus Norges Bank's foreign exchange purchases. On the basis of assumptions regarding changes in these quantities, Norges Bank may purchase more foreign exchange than indicated by the original transfer estimates. Norges Bank may also purchase less foreign exchange than indicated by the transfer estimates, if economic developments suggest that actual allocations will decrease or that the buffer portfolio is large enough to cover future allocations. To keep the krone exchange rate stable, Norges Bank tries to spread foreign exchange purchases over the course of the year. In general, Norges Bank seeks to reduce the size of the buffer portfolio towards year-end.

Quarterly inflows into and outflows from the buffer portfolio. NOK million.

* Market value at the end of the quarter deviates somewhat from net cash flow because market values change over the course of the month

Holdings and inflows into the buffer portfolio are published in the quarterly report on the management of the Bank's foreign exchange reserves.

Change in allocation procedure as from October 2012

Prior to 2012, no transfers were made to the GPFG in December. For the year as a whole, Norges Bank would plan foreign exchange purchases on the basis of eleven months of transfers and twelve months of foreign exchange inflows from the SDFI. Since the foreign exchange inflow from the SDFI in December could not be transferred to the GPFG the same month, it was “parked” in the buffer portfolio for allocation in the subsequent calendar year. However, the Ministry of Finance included the December inflow from the SDFI in its estimate of the year's allocation. Thus, Norges Bank needed to make up for the December inflow from the SDFI through foreign exchange purchases before the end of November, when the final allocation for the year was made.

In October 2012, the guidelines for managing the GPFG were amended to include a foreign exchange transfer to the GPFG in December. The change requires the foreign exchange income from the SDFI in December to be included when Norges Bank plans its foreign exchange purchases for the year. Because of the allocation to the GPFG in December, Norges Bank will ordinarily purchase foreign exchange for this purpose also in December. This means that Norges Bank will purchase somewhat less foreign exchange for the GPFG in the remaining months of the year. Reference is also made to a press release from Norges Bank, dated 31 October 2012, “Norges Bank's foreign exchange purchases in November 2012". 

For further information, see The petroleum fund mechanism and Norges Bank’s foreign exchange purchases for the GPFG (Economic commentaries 14/2012)

Daily purchases in millions of NOK:

 * From 23 October 2008: NOK 620 million

** From 21 May 2003: NOK 0 million