Joe Oliver: Ottawa’s new Sovereign Dysfunctional Intrusion Fund

Government-sponsored initiatives risk crowding out private capital. yet Mark Carney evidently believes government should play an even larger role in the economy. Photo by Blair Gable/Postmedia

Article content

Prime Minister Mark Carney hailed his new $25-billion Canada Strong sovereign wealth fund, the “people’s fund” (which evokes both Karl and Groucho Marx), as a nation-building initiative. In reality, it is a costly boondoggle with problematic funding, objectives and governance that advance more government intrusion in the economy — which is clearly Carney’s favoured solution to every challenge, whether real, imagined or self-inflicted.

Article content

Article content

An examination of Norway and Singapore’s sovereign funds is instructive. There are two fundamental differences between their approach and Canada’s.

Article content

Article content

Article content

Norway’s US$2.2-trillion Government Pension Fund Global (GPFG) was created to invest oil and gas revenue for future generations and to finance over 20 per cent of the state budget. So as to avoid overheating the domestic economy, all its funds are invested outside Norway. In 2025, GPFG earned about C$348 billion. That’s equivalent to 60 per cent of Ottawa’s total spending last year, which poignantly demonstrates how maximizing oil and gas development can enrich a country that nevertheless positions itself as a leader in climate action. Since embarrassment is entirely absent from the Liberal persona, coping with the cognitive dissonance from such a contradiction would not be a problem.

Article content

Singapore’s two sovereign-fund investors, valued at about US$1 trillion, also invest outside Singapore. The capital came from surpluses and some borrowing, but Singapore’s constitution requires its government to maintain a balanced budget over its term in office.

Article content

Article content

In Canada’s case, the initial $25 billion will all be borrowed, thus adding to $1.34 trillion of federal debt. Carney will classify the spending as a capital investment, however, and put it in a capital budget, rather than the operating budget. That accounting trick will not fool credit rating agencies, institutional investors or economists, while taxpayers will still have to pay interest on the additional indebtedness, wherever it is allocated. If instead the fund borrows directly, that will require a government guarantee, creating a contingent liability on Ottawa’s books. In that event, interest payments would reduce the fund’s profitability. Any profit would result from a hoped-for positive spread between the carrying costs and investment income, much of which would be a long time coming since major projects can take many years to approve and build.

Article content

Article content

The fund’s initial capital could be increased by offering individual Canadians the opportunity to invest, with a backstop if things don’t work out. A guarantee you get your money back is nice; earning a profit is better, although some “patriotic” investors may not mind the dead money. Funding can also come from monetizing federal assets, such as airports, rather than using the proceeds to reduce federal indebtedness. Getting government out of business is desirable, given its inherent incompetence, but then having it re-enter to pick winners and losers does not inspire confidence.