Oil-rich Norway will withdraw a record $37 billion from wealth fund as COVID-19 batters economy

Norway plans to draw a record 382 billion kroner ($37 billion) from its wealth fund, in a move that will force the world’s biggest sovereign investor to embark on an historic asset sale to generate cash.

The unprecedented withdrawal is more than four times Norway’s previous record, which was set in 2016. The development reveals the scale of the economic damage done by the twin crises of Covid-19 and a collapse in global oil markets, with western Europe’s biggest crude exporter now facing its worst economic slump since World War II.

For the first time, Norway’s government is set to withdraw considerably more than the $1 trillion fund generates in cash flow from dividends and interest payments. The fund hasn’t provided an estimate for its income this year, but has said it’s bound to be lower than previously expected, as companies slash shareholder payouts. The fund’s cash flow was 243 billion kroner last year.

With asset liquidation now an inevitability, the fund is likely to focus sales on its bond portfolio. That’s because it needs to increase its holding of stocks after the equity portfolio fell below a required 70% target of the total portfolio.

Norway’s government uses its oil wealth to plug budget deficits every year. Until 2016, the so-called structural oil-corrected deficit was covered by the state’s income from petroleum, namely taxes, stakes in offshore fields and dividends from Equinor ASA. As long as the government was generating a surplus, it could deposit money into the fund. In 2016 and 2017, deposits were replaced by withdrawals, as petroleum revenue dwindled due to a slump in prices. But the fund was still able to cover that easily with its cash flow.

In 2020, everything changed. The government now expects to spend a record 420 billion kroner of oil money on crisis packages to prop up its economy, with the collapse in petroleum revenue adding to the shock. The government predicts its net cash flow from petroleum activities will drop by 62% to 98 billion kroner, the lowest since 1999.

More must-read energy sector coverage from Fortune:

—Why the coronavirus crisis could make Big Oil greener
—Buccaneers of the basin: The fall of fracking—and the future of oil
—As lockdowns decimate energy demand, renewables come out ahead of coal
—The Church of England is going up against ExxonMobil on climate change. Can it win?—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: Why the coronavirus crisis could make Big Oil greener

Subscribe to The Loop, a weekly look at the revolutions in energy, tech, and sustainability.

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.