The budgetary rule
Encyclopedia
The budgetary rule is a rule concerning the usage of capital gain
s from The Government Pension Fund - Global of Norway
. The rule was introduced in 2001 by the First cabinet
Stoltenberg
to ensure that the sovereign wealth fund
, with a vast majority of its dealings related to activities in the petroleum industry, would secure sustainable development
for the future generations of Norway. The budgetary rule will thereby continue to yield in the future, even when the petroleum resources of the North Sea
and other operational areas come to an end.
The rule states that a maximum of 4% of the fund's yield should be allocated to the yearly government budget
. Disregarding the future petroleum income, the fund will still remain an important budgetary source of revenue. As of today, with the value of the pension fund increasing every year, the rule will secure even better conditions for today's and future generations. A broad majority of the political parties in Norway have agreed to comply with this fixed percentual usage.
The rule was partially intended to avoid a state of "Dutch disease
".
Capital gain
A capital gain is a profit that results from investments into a capital asset, such as stocks, bonds or real estate, which exceeds the purchase price. It is the difference between a higher selling price and a lower purchase price, resulting in a financial gain for the investor...
s from The Government Pension Fund - Global of Norway
Norway
Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million...
. The rule was introduced in 2001 by the First cabinet
First cabinet Stoltenberg
Stoltenberg's First Cabinet governed Norway between March 17, 2000 and October 19, 2001. The Labour Party cabinet was led by Prime Minister Jens Stoltenberg. It had the following composition.-Cabinet members:-State Secretaries:-References:...
Stoltenberg
Jens Stoltenberg
is a Norwegian politician, leader of the Norwegian Labour Party and the current Prime Minister of Norway. Having assumed office on 17 October 2005, Stoltenberg previously served as Prime Minister from 2000 to 2001....
to ensure that the sovereign wealth fund
Sovereign wealth fund
A sovereign wealth fund is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. Sovereign wealth funds invest globally. Some of them have grabbed attention making bad investments in several Wall Street financial...
, with a vast majority of its dealings related to activities in the petroleum industry, would secure sustainable development
Sustainable development
Sustainable development is a pattern of resource use, that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for generations to come...
for the future generations of Norway. The budgetary rule will thereby continue to yield in the future, even when the petroleum resources of the North Sea
North Sea
In the southwest, beyond the Straits of Dover, the North Sea becomes the English Channel connecting to the Atlantic Ocean. In the east, it connects to the Baltic Sea via the Skagerrak and Kattegat, narrow straits that separate Denmark from Norway and Sweden respectively...
and other operational areas come to an end.
The rule states that a maximum of 4% of the fund's yield should be allocated to the yearly government budget
Government budget
A government budget is a legal document that is often passed by the legislature, and approved by the chief executive-or president. For example, only certain types of revenue may be imposed and collected...
. Disregarding the future petroleum income, the fund will still remain an important budgetary source of revenue. As of today, with the value of the pension fund increasing every year, the rule will secure even better conditions for today's and future generations. A broad majority of the political parties in Norway have agreed to comply with this fixed percentual usage.
The rule was partially intended to avoid a state of "Dutch disease
Dutch disease
In economics, the Dutch disease is a concept that purportedly explains the apparent relationship between the increase in exploitation of natural resources and a decline in the manufacturing sector...
".