NORWAY - The IMF has warned the Norwegian government that it should resume payment of oil revenues to the Government Pension Fund - Global by reducing the country's non-oil budget deficit to 4% of the Global Fund's value, and within the three remaining years of its the current parliamentary term.
The government announced a revised budget in May this year that foresaw an increase in spending of oil revenue NOK9.5bn to NOK130bn - revenues that would otherwise flow into the Global Fund.
In a concluding mission statement on Norway, the International Monetary Fund (IMF) said the Norwegian economy had "weathered the global financial crisis remarkably well" and suggested the economic recovery is expected to continue. However, it warned that to maintain flexibility and resilience in the future, policymakers and social partners should ensure "fiscal space is regained to deal with future shocks and long-term aging-related spending pressures".
Norwegian fiscal policy allows petroleum revenues, generated through the sale of its oil, to be used to cover a budget deficit as well as finance its long-term pensions requirements. Any budgetary spending by the government has to correspond to the expected real return of the Government Pension Fund - Global, estimated at 4%.
However, legislation also allows revenues usually channelled to the Norway Government Pension Fund-Global to be used during times of crisis, to support the economy. And in May this year, the Ministry of Finance outlined revised Budget proposals which would increase the annual spending of oil revenues by a further NOK9.5bn this year to a total of NOK130bn (€15.5bn) for 2009 - an action which is "NOK 39bn in excess of the estimated return on the Government Pension Fund - Global". (See earlier IPE article: Norway global heads towards NOK 2.2trn)
In response to the IMF's recommendations, Sigbjørn Johnsen, the Norwegian finance minister, said: "I agree with IMF's conclusions on fiscal policy. It is important that we return to the 4% path. This will ease the situation for the export-oriented sector, and also help ensure that oil revenues are distributed fairly across generations."
Meanwhile, the Ministry of Finance has confirmed it has decided to exclude the Russian mining company Norilsk Nickel from the Government Global pension fund's investment universe. This followed a recommendation from the Council of Ethics claiming mining operations are contributing to extensive environmental damage at its site in Siberia.
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