The Norwegian government is to be more cautious in drawing down the Government Pension Fund Global (GPFG) over concerns the sovereign wealth fund’s size will be hit by market uncertainty.

The Ministry of Finance said the addition to the fiscal rule – which stipulates that transfers from the fund be in line with its expected 4% return target – were necessary so that governments knew how to apply it when the value of the fund fluctuated widely in value.

The commission, chaired by Øystein Thøgersen of the Norwegian School of Economics (NHH), found that drawdowns from the fund were “well below” the expected real return for the GPFG due to strong growth over the past few years.

Two new rules are being proposed – one governing limited fund withdrawal and one for the gradual phasing in of further expenditure.

The latter, the commission argued, will still allow drawdowns to rise by up to NOK8bn (€917m) a year in normal economic times.

At the end of 2014, the GPFG’s assets stood at NOK6.4trn, an increase of NOK1.4trn over the course of the year, and it has since seen assets approach NOK6.9trn.

The committee argued that a more gradual increase in spending of the sovereign fund’s assets was required, as a “swift” increase in spending could lead to fiscal tightening long before the country is affected by the cost of an ageing population.

It also argued that a different approach was needed because the fund was facing a lower real return over the next 10-15 years.

“A more gradual increase in spending is better suited to uncertainty, population ageing and declining activity on the continental shelf,” it said.

“Given the current outlook, the spending of oil revenues will then be well below the 4% path for many years to come.”

According to the Norwegian government’s most recent budget, it was able to cover one in nine kroner spent through the GPFG, while only drawing down 3%.

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