Intent to establish a sovereign wealth fund in Iceland
The authorities intend to establish a sovereign wealth fund, the National Fund of Iceland. The purpose of the Fund will primarily be to serve as a sort of disaster relief reserve for the nation, when the Treasury suffers a financial blow in connection with severe, unforeseen shocks to the national economy, either due to a plunge in revenues or the cost of relief measures that the government has considered unavoidable to undertake. This refers to disruptions which occur very rarely but, as history shows, can strike at intervals of several decades, such as major natural catastrophes which could result in extensive damages to settlements, transport infrastructure or hydroelectric power plants and power-intensive industry, ecosystemdisasters, epidemic diseases or other shocks, causing huge economic damage beyond what is insured by other means, such as through Natural Catastrophe Insurance of Iceland. Examples of such major events occurring in the past include natural catastrophes such as the Skaftáreldar eruptions and the ensuing Móðuharðindi famine (1783-85) or the Westman Islands eruption (1973), ecosystem failures such as the collapse of the herring stock (1969) or an epidemic such as the Spanish flu (1918). It could also include events or circumstances of a completely different nature, such as the consequences of large-scale cyberattacks on the country’s key infrastructure or acts of terrorism.
These could comprise shocks that the Treasury, as things currently stand, lacks sufficient financial strength to withstand without causing significant debilitating impacts on the social welfare of the natinon as a result of cutbacks to public services, or which would impose a debt burden that would be onerous for a long period or even unsustainable. Therefore the legislation is based on the long-term perspective of creating a very substantial fund, which could respond to the consequences of major unforeseen and rare shocks to public finances, rather than having the fund itself directly finance compensation, e.g. for damages suffered by specific industrial sectors or groups.
The state's contributions to the Fund will be equivalent to new revenues from publicly owned power production companies which are expected to accrue in the coming years.
On the government‘s website, samradsgatt.is, the government‘s intent for legislation has been published in Icelandic.