The Norwegian Prime Minister Jens Stoltenberg has announced that his government will limit spending of oil revenue beginning in 2011 as a safeguard against overheating the economy and forcing interest rates up.
Norway has traditionally kept the majority of oil and gas revenue in a wealth fund offshore to avoid over-stimulation of the local economy. However, in reaction to the global economic crisis, the government has been forced to spend record amounts of petrodollars in order to keep the economy afloat.
The centre-left government led by Stoltenberg has not as yet revealed when a return to the oil-spending policy that limits the country to a 4 percent spend of oil wealth in a normal year may come about. Norway’s central bank, along with market analysts and the OECD have all criticised the 2009 and 2010 spending levels which are well over the limit according to an Interactive Investor report.
“We will start the work today, and it will be a budget which will contribute to keeping interest rates low and secure Norwegian jobs,” said Stoltenberg ahead of a three-day conference to discuss the fiscal plan for 2011.”We have said that we need to reduce the spending of oil money next year… How quick and how much we will (cut) each year, is what we will decide through this work,” he claimed.
A new, less expansive fiscal policy has been deemed necessary to avoid hampering an economic recovery and to ensure stability of the local currency–which is trading at its highest level since the start of the recession in August 2008.