Withdraw NOK 620 billion from the Petroleum Fund in two years – E24

In recent years, the amount the government has been able to set aside and save in the Petroleum Fund from its income from oil and gas production, oil taxes, and Equinor dividends has increased and decreased.

Last year, the government had money left over and invested NOK 28.4 billion in the Oil Fund. This money is invested in stocks, bonds, and real estate around the world, and it has produced enormous returns in recent years.

The crisis in the crown has changed the situation significantly. Norway’s oil revenues have been hit hard by the drop in oil prices after the crisis, and the use of oil money has increased significantly. The state expects to spend 60,000 kronor of oil per capita next year.

As a result, the Minister of Finance now expects to withdraw NOK 346.5 billion from the Petroleum Fund this year and NOK 272.7 billion in 2021. Thus, last year’s government savings have been converted into an “exploitation” of the oil fund a total of NOK 619 billion in these two years.

However, the value of the fund will not be reduced by NOK 619 billion for that reason. The fund is expected to receive more than NOK 400 billion in total interest and dividend income for this year and next.

When these revenues are absorbed by the state, it also means that the value of the Oil Fund grows more slowly than it would have otherwise. But the government still assumes that the value of the fund will grow even more in the coming years (see table).

Worst deficit since the 90s

Norway has gone from expecting a strong overall surplus in the central government budget and the Government Pension Fund (that is, the Petroleum Fund and the National Insurance Fund) this year to running the worst deficit in decades.

According to the government, this deficit will be NOK 123.5 billion this year and NOK 37.6 billion next year, that is, NOK 161.1 billion for the two years combined.

“We must go back to the 1970s and early 1990s, after the Norwegian banking crisis, to find a corresponding deficit,” the government writes.

“The change is due to a sharp increase in the oil-adjusted budget deficit and a large decrease in cash flow from the oil business, especially as a result of large temporary fiscal changes for oil companies, but also lower oil prices and gas, “they write.

– The level of spending is very high

According to the government, the huge use of money in this year’s budget has been necessary. A less powerful response to the crown crisis could have given the Norwegian economy a bigger shock and led to more bankruptcies and higher unemployment, the government says.

In the long term, Norway should restrict its use of oil money, according to the government. It will reduce the use of oil money from NOK 404 billion this year to NOK 313 billion next year.

Although spending is lower, it is still skyrocketing above what was actually planned to be spent in 2020, before the crisis in the crown knocked down all expectations.

“Expenditure in public administrations was already at a high level before the crisis, measured as part of the creation of value in the economy. In the current year, spending has risen to about 66 percent of gross national product, and about 20 percent of public spending is covered by transfers from the Global Government Pension Fund, ”the government writes.

“The level of spending is very high both historically and in comparison with other countries,” says the government.