Why Norway's government wants to slash the use of oil money

Frazer Norwell
Frazer Norwell - [email protected] • 31 Aug, 2022 Updated Wed 31 Aug 2022 10:41 CEST
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Norway's Finance Minister has said that the government will cut down the use of oil spending. Pictured is an oil platform in the North Sea. Photo by Dean Brierley on Unsplash

Norway's government will stem the flow of oil money into public coffers to try and curb inflation, Minister of Finance Trygve Slagsvold Vedum said Tuesday. 

Norway's Finance Minister, Trygve Slagsvold Vedum, has said that the government will slow the spending of oil money to help curb inflation and keep interest rates under control. 

"We must do what we can to bring inflation under control," Vedum said during a speech. 

Money generated from oil revenues is used by the government in Norway to top-up public spending. The money is drawn from the Government Pension Fund, the largest sovereign wealth fund in the world. There is more than 11 trillion kroner currently in the fund

READ MORE: What does Norway do with its oil money? 

Cutting oil funding is seen as a measure that can help curb inflation and rising interest rates. In August, Norway's central bank, Norges Bank, raised the key interest rate by 0.5 percent. 

The country's key interest rate has risen from zero percent last year to 1.75 percent in August. Norges Bank has already announced another interest rate in September. 

Vedum added that decreasing oil spending could help prevent low and middle-income families from feeling the squeeze. 

"The easiest thing for politicians is to spend a lot of money on all sorts of things. But then we know that the pace of the economy will pick up even more and that will put further pressure on prices, and it affects those with the lowest and medium incomes, and a number of smaller and vulnerable businesses," Vedum. 

Unemployment was also something that Trygve Slagsvold Vedum was wary of ahead of the government unveiling the budget later this fall. 

"History shows that after a period of high price growth comes a period of high unemployment. This government will avoid that at all costs," he said. 

Prime Minister, Jonas Gahr Støre, has echoed similar thoughts and said this year's budget would be "tight and fair". 

"There are new expenses that we must take in in a responsible way by creating a good state budget for the country and people, and we are well on our way to doing that. This is going to be a tight and fair budget," he said. 

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Frazer Norwell 2022/08/31 10:41

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