Norway taps oil wealth to cushion Covid impact

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Norway taps oil wealth to cushion Covid impact
Norway will be dipping into its oil fund to boost the country's economic recovery. Photo by Jan-Rune Smenes Reite Pexels

Norway will spend billions of dollars more than planned from its oil revenues to mitigate the impact of the pandemic, the government announced on Tuesday, as tough elections loom in September.


In an amended draft finance bill, the right-wing government said it plans to spend a record 402.6 billion Norwegian kroner ($49 billion, 40 billion euros) of its oil revenues, which normally goes into its sovereign wealth fund the largest in the world.

That's almost 90 billion kroner more than was planned in the original draft budget presented in October.

READ MORE: Norway's wealth fund gains 38 billion euros in first quarter

"Extraordinary economic support measures related to the pandemic account for a large bulk of the increase," Norway's ministry of finance said in a statement.   

Having put away most of the country's oil revenues for several decades, Norway has the world's largest sovereign wealth fund, now worth more than 1.1 trillion euros.  

Normally, the government can draw up to three percent of the fund's value to finance its spending, but the extra boost to the economy announced on Tuesday means that this figure will rise to 3.7 percent this year.


 "The pandemic still weighs on the Norwegian economy," the ministry said. Since the government only controls a minority in parliament the budget bill still needs to be negotiated with opposition parties.

The right-wing coalition led by Prime Minister Erna Solberg, which has been in power since 2013, faces a parliamentary election in September that polls suggest will be a tight race.

After a contraction of 2.5 percent in 2020 related to the health crisis, the Norwegian economy is expected to grow by 3.7 percent in 2021, according to government projections.

"Lower infection rates and a rising share of the population being vaccinated give reason for optimism, although uncertainty remains high," the ministry said.



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