The daily foreign exchange transactions in January are lower than implied by the budget figures for 2021. This is to ensure that Norges Bank has sufficient foreign exchange for sale through the month. Norges Bank maintains a separate portfolio, called the petroleum buffer portfolio (PBP), to manage the flows related to foreign exchange transactions. The government’s cash flow from petroleum activities in foreign currency (revenue from the State’s Direct Financial Interest, SDFI) is transferred to the PBP; the same applies to transfers of foreign exchange from the Government Pension Fund Global (GPFG). Norges Bank sells this foreign exchange from the PBP.

In planning transactions, Norges Bank will seek to avoid situations where the level of the portfolio falls below zero. The daily foreign exchange sales entail a decline in the PBP through the month, even if some of the foreign exchange sold is covered by current foreign exchange revenue from the SDFI. The lowest level of the PBP through the month sets a limit for the size of daily foreign exchange sales. The size of the PBP rises markedly again at the end of each month when foreign exchange is transferred from the GPFG.

Norges Bank purchases foreign currency from the SDFI each month. If the government’s net cash flow from petroleum activities exceeds the non-oil budget deficit, some of the foreign exchange purchased from the SDFI is transferred to the GPFG. Norges Bank sells the remaining amount in the market.

If the government’s net cash flow from petroleum activities is insufficient to cover the non-oil budget deficit, foreign exchange will be transferred from the GPFG to cover some of the budget deficit. Norges Bank will then sell foreign exchange from the GPFG, as well as the foreign exchange from the SDFI, in the market. Norges Bank performs this task on behalf of the government.