Where governments do have sovereign wealth funds to draw on to support their economies through the pandemic, they've done so in different ways.
Two countries have created subfunds. In May, Ireland's minister for finance and public expenditure and reform, Paschal Donohoe, announced the carving out of €2 billion ($2.3 billion) from the Dublin-based Irish Strategic Investment Fund's €10.8 billion portfolio to create the Pandemic Stabilization and Recovery Fund. The subfund supports businesses that would be commercially viable were it not for the coronavirus.
The second example cited by sources was Folketrygdfondet, the in-house manager of the 237.3 billion kroner ($25.2 billion) Government Pension Fund of Norway, Oslo — a wealth fund focusing on domestic investments — which was given a new mandate by the Ministry of Finance in March: To revive and run the Government Bond Fund.
The fund, also used during the global financial crisis, aims to increase liquidity and capital inflows in the Norwegian bond market.
Another option for governments is to withdraw cash from their sovereign wealth funds — something that, in most cases, is within their mandate:
- In May, the Norwegian government said it would make an almost 420 billion Norwegian kroner ($44.6 billion) withdrawal of petroleum revenues from the 10.1 trillion kroner Government Pension Fund Global, Oslo.
- In April, the Nigeria Sovereign Investment Authority, which runs 649.8 billion naira ($1.7 billion) across three sovereign funds, said the government planned to make its first withdrawal, of $150 million, from the $351 million stabilization fund. The cash will "assist government in addressing the emerging fiscal risks due to the coronavirus pandemic and the recent decline in government revenue," a news release said.
- Also in April, a €1 billion withdrawal from the National Development Fund of Islamic Republic of Iran, Tehran, was approved to "confront and manage the effects of (the) coronavirus outbreak in the country," a statement posted on President Hassan Rouhani's website said. The fund has $91 billion in assets, according to the Sovereign Wealth Fund Institute.
Despite the damage caused by the pandemic, "we haven't seen that many additional withdrawals," Ms. Barbary said.
The reason is that many countries can borrow cheaply on the international markets, which is cheaper than liquidating wealth fund holdings and maintains a country's credit rating, she said.
However, as the pandemic runs on, there will be increased pressure on "those countries with perhaps less robust economies and less headroom to borrow, and we are starting to see withdrawals being (considered)," Ms. Barbary said.