Branches of Foreign Banks and Credit Supply

Abstract

Over time, the government has received substantial revenues in both NOK and foreign currency from the petroleum sector (the government’s net cash flow). At the same time, the government earns considerable foreign currency income in the form of returns on the Government Pension Fund Global (GPFG). Some of this revenue is used each year to finance the non-oil budget deficit in line with the fiscal rule. Up until 2015, the government’s net cash flow from petroleum activities exceeded the non-oil deficit. The difference was then transferred to the GPFG. From 2016, the situation has been the reverse. The government’s net cash flow from petroleum activities is no longer sufficient to finance the entire non-oil deficit. Portions of the return on the GPFG are therefore transferred from the GPFG to be spent via the central government budget. At Norges Bank, foreign exchange transactions associated with the petroleum fund mechanisms are managed in a separate foreign exchange portfolio called the petroleum buffer portfolio (PBP). The transition from the previous situation with transfers to the GPFG to the current situation with transfers from the GPFG has resulted in changes in movements in this portfolio, both in the course of the month and during the year as a whole. While the level of the PBP previously rose through the month, it will now fall through the month. This results in a need to increase the size of the PBP ahead.