Norway intends to tap its sovereign wealth fund for additional cash as part of increased spending on national budgets, including defense related to the war in Ukraine.
The structural nonoil fiscal deficit — the use of petroleum fund spending — is estimated to increase to 418.7 billion Norwegian kroner ($38.5 billion) in 2024, up 9 billion kroner vs. the original budget presented in the fall, a spokesperson for the Norwegian Ministry of Finance confirmed by email.
However, the withdrawal from the Government Pension Fund Global (GPFG) is set to remain at 2.7% of its value as of the start of the year. The spokesperson said the withdrawal rate is the same even though the spending has increased, due to an increase in the sovereign wealth fund’s value. GPFG had 15.76 trillion kroner in assets as of Jan. 1.
Transfers from the wealth fund cannot exceed 3% over time, according to a fiscal rule.
“A new geopolitical situation requires that Norway prioritizes security at home and abroad, to a greater extent than before,” said a news release accompanying the revised budget Tuesday. “While remaining fiscally responsible, the government proposes to significantly increase investment in defense, security and policing. The proposed revisions from the budget approved by Parliament last autumn are to a large extent related to the consequences of the war in Ukraine.”
Last year, withdrawals from GPFG stood at 384.9 billion kroner. As a share of Norwegian gross domestic product, the structural deficit — wealth fund spending — will increase by 0.7 percentage points in 2024, the news release added.
The additional 9 billion kroner will be distributed across several expenses, including the defense budget, the police budget and hospital budgets. Within the total expenditure in the budget, 60 billion kroner is related to the war in Ukraine and its consequences.