Norway unveiled plans to spend a record amount of its oil revenue to cover budget needs as the government said it will explore ways to cap future expenditure.
The minority coalition proposed spending a record 164 billion kroner ($25 billion) of oil revenue in 2015, up from 140.9 billion kroner in the revised budget for this year. That represents 3% of its wealth fund, the world’s biggest. Though well within a 4% spending limit, growth in the $850 billion fund means the cap represents a rising cash mound.
The government has appointed a committee to review the spending rule, Finance Minister Siv Jensen said today. Expenditure in 2015 will reach a record 6.4 percent of Norway’s mainland economy, versus 5.8% in 2014.
“The strong growth in the wealth fund gives Norway opportunities few other countries have,” Jensen said in parliament today.
“But it has also made management of fiscal policy more difficult.”
The Liberal Party and Christian Democrats, whose backing Jensen’s minority government needs in parliament, have already signalled they want to limit spending to 3 percent of the fund. That’s in line with recommendations from Norges Bank Governor Oeystein Olsen, who helped design the spending rule last decade. He argues the cap should be lowered to prevent Scandinavia’s richest economy from overheating.
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