The use of oil money must be increased as a result of the Norwegian government’s Ukraine package. This could lead to increased pressure on prices and wages.

On Friday, the government presented a new crisis package with a budget of NOK 14.4 billion to cope with the influx of refugees from Ukraine and strengthen the Armed Forces and civil emergency preparedness.

It comes on top of previous packages of NOK 24.7 billion for corona measures and NOK 19.6 billion for electricity support. The consequence is increased use of oil money in 2022, the Ministry of Finance stated.

This is happening in a situation where Norway is in a boom, with prospects of attractive wage and price growth, and rising interest rates.

“Increased public spending in a situation with high activity in the economy and lack of available resources will increase the pressure on prices and wages,” the Ministry of Finance warned in the budget bill where the crisis measures are presented.

The right calls for cuts

However, in the budget bill, the government does not propose cuts to offset the increased expenditures. The Conservative Party (H) has reacted.

“I expect the government to also come up with proposals for coverages. For the Conservatives, it is important that the coverage is done in a financially responsible way that does not create too much pressure on the economy that can lead to even higher interest rates,” said Helge Orten, who sits on the Finance Committee in the Norwegian parliament (Storting) for the Conservatives.

Prime Minister Jonas Gahr Støre (AP) replied that the proposals for coverage would come later – in connection with the ordinary budget process.

“I don’t remember that there were coverage proposals together with the corona expenses in the spring of 2020,” Støre told NTB.

“We have two proper items for this, a revised national budget in May and a budget at the end of the year,” he said.

Unique reserves

Minister of Finance Trygve Slagsvold Vedum (SP) admits that the use of oil money will, in all probability, increase as a result of the new crisis measures.

“But then part of our strength is that we have these reserves that we can use in extraordinary situations such as this one now. Then it is right to strengthen the Armed Forces and the civil emergency preparedness,” Vedum told NTB.

Støre points out that other countries in Europe must take out loans to finance the consequences of the refugee crisis. Norway is in a better position, he maintains. At the same time, the Prime Minister believes that the spending is not large.

“This is not a generous scheme. This is a scheme ensured to be able to meet the challenges in a safe and sober way. Then we will present a state budget, which is well adapted to the situation in the Norwegian economy,” he said.

High level of spending

However, in the budget bill itself, the Ministry of Finance comes with clear warnings.

“The use of oil money has reached a high level and in 2022 is significantly higher than before the corona pandemic, despite the fact that most economic measures against the pandemic have been scaled down when the infection control measures have now been lifted,” the Ministry stated.

And in the long run, spending must go down:

“Considerations of the sustainability of public finances dictate that permanently increased expenditures must be covered in other ways than permanently increased use of oil money. In the years ahead, the room for maneuver in the state budget will be significantly smaller than in previous years, at the same time as age-related expenditure will increase.”

The two governing parties have now invited the Storting to negotiate a broad settlement on the crisis measures.

Source: © NTB Scanpix / #Norway Today / #NorwayTodayFinance

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