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Norway Set to Use Record Oil Fund Money In 2017 Budget

Offshore North Sea

Norway’s government is expected to make a rare decision and use just over 3 percent from its giant US$899 billion oil fund - the world’s largest – in next year’s budget, local media report, citing estimates by the statistics office and investment banks.

The government has rarely used more than 3 percent of the Government Pension Fund Global, also known as Norway’s oil fund.

The Norwegian fiscal policy sticks to a fundamental rule, the so-called budgetary rule, under which the government may spend no more than the expected real return of the fund, which is estimated at 4 percent per year.

According to estimates by Statistics Norway SSB, DNB Markets and Nordea Markets, Conservative Prime Minister Erna Solberg and Finance Minister Siv Jensen will present this Thursday a budget bill that will envisage the use of US$28.18 billion (225 billion kroner) from the fund next year.

Last year, US$22.49 billion (179.6 billion kroner) was transferred from the fund to the budget.

As of the end of the second quarter of this year, the fund had a market value of US$898.8 billion (7.177 trillion kroner).

Some experts are not very happy with the proposals to use more oil money in the budget. Professor Øystein Thøgersen at the Norwegian School of Economics (NHH) has told NTB website that he was worried that Norway has been too dependent on oil money for a long time.

Various analysts expect Norway to ease fiscal stimulus next year compared to this year, because signs are emerging that the economy is on the road to recovery, Bloomberg reports.

In what many have seen as a ‘paradox’, Norway is planning to use money from the fund to finance clean energy initiatives and projects. The electric car market will be one of the sectors to benefit from the new program as “lucrative” subsidies from the fund will be used to ensure Norway becomes carbon neutral by 2030.

By Tsvetana Paraskova for Oilprice.com

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