Switzerland may be sitting comfortably on hundreds of billions of dollars of foreign investments, but there is a growing clamour to spend more of its vast wealth at home.
There is a renewed debate in the country about using some of the money to set up a sovereign wealth fund to invest in Swiss businesses, build roads and tunnels and fund healthcare.
After the financial crisis, and to prevent the franc’s value soaring and thus protect exporters, the central bank set the printing presses rolling to buy foreign currency. As a result, the Swiss National Bank is sitting on foreign currency reserves of about $750 billion in cash, bonds and shares, including a near-$3 billion stake in Apple.
Other countries that have amassed similar windfalls have set up sovereign wealth funds, notably Norway, funded by North Sea oil, and Qatar, by gas, though the list stretches from Algeria to Papua New Guinea.
Intent on following suit, Swiss socialist parliamentarians have tabled legislation to set up a fund, but are unlikely to get their way. The central bank, which already distributes a proportion of profits, is firmly against the idea and Thomas Jordan, its chairman, has said: “Our foreign exchange reserves aren’t just banknotes we put under the mattress.”
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The bank argues that the currency reserves are not a simple windfall and that they play an important part in flexing monetary policy, allowing it to buy and sell bonds and shares quickly as markets move.
Moreover, clawing back money could be fraught with problems. Daniel Kalt, UBS chief economist for Switzerland, warned that taking $100 billion off the central bank’s balance sheet would drive up the value of the franc. He added that a one-off windfall could be spent merely on whatever is politically popular at the time.
Mr Kalt suggested taking annual profits from the currency reserves over three to seven years to create a fund of between $30 billion to $50 billion, which, in turn, would distribute only the yield on its investments. “Rather than benefit just one generation from a potential once-in-a- lifetime windfall, this would make it accessible for all future generations,” he said.
A fund could make generating high returns its top priority, unlike the central bank, which focuses on liquidity, allowing it to invest in less liquid assets such as property and long-term projects. That could increase receipts for national and regional governments to spend on essential projects.