The right-wing government plans to use 225.6 billion kroner (€25 billion, $28 billion at current exchange rates) of its oil revenues in 2017, or 20 billion kroner more than this year.
That corresponds to an extra 0.4 points of gross domestic product (GDP), the government said in the budget bill.
Norway's oil-dependent economy has slowed considerably as a result of the falling oil price, which has dropped from around $115 per barrel in mid-2014 to around $50 now.
But the economy is showing signs of recovery.
Thanks to interest rate cuts, a weaker Norwegian krone, and an expansionary budget policy, growth is picking up and the unemployment rate appears to be topping out at the enviable level of around 5.0 percent.
Mainland GDP — excluding oil, gas and shipping — is expected to tick in at 1.0 percent this year, 1.7 percent next year, and 2.4 percent in 2018, according to the government's forecasts.
“But it's too early to say that the Norwegian economy is cured,” Finance Minister Siv Jensen said as she presented the 2017 budget bill.
The government therefore plans to spend up to 3.0 percent of its sovereign wealth fund, the world's largest, today worth around 7.13 trillion kroner (€793 billion, $886 billion). That's more than the 2.8 percent used this year, but less than the 4.0 percent maximum that is authorised.
The country's September 2017 legislative elections look set to be a close race between the ruling coalition — made up of the Conservatives and the anti-immigration populist right — and the leftwing opposition.
The budget bill calls for tax breaks for households, a one-point reduction of the corporate tax rate to 24 percent, a tax hike on petrol, and sets a seven-percent target for biofuels' market share.
The minority government will now undertake negotiations with its centre-right allies in parliament to win their backing for the budget, which means it could see some amendments before being passed.