Norway Ready to Cut Budget if Krone Too Strong, Says Solberg

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Norway Ready to Cut Budget if Krone Too Strong, Says Solberg


Category: Government

“If the Norwegian krone starts to appreciate more, we have to cut back on our budget,” Solberg said today in an interview in Oslo. “One of the long-term goals of this government is to make sure there is competitiveness for our non-oil businesses so they become better. And one of the areas for competitiveness is investments and the exchange rate.”

Solberg’s government, which took office last month, today unveiled a set of proposals that targets using more of the nation’s oil wealth to cover the cost of tax cuts and spending on infrastructure and education. Use of Norway’s $800 billion sovereign wealth fund will be equivalent to 5.7 percent of trend mainland gross domestic product, up from an estimated 5.2 percent for this year, the government said.

Central bank Governor Oeystein Olsen has also deployed policy to tame the currency. Olsen, in an interview last month, said the krone played a role in his rate decisions, a stance that has helped drive down the currency by about 11 percent against the euro this year.

The krone slumped as much as 1.5 percent against the euro to 8.2318, the lowest since Oct. 29, 2010. It was down 1.2 percent as of 3:58 p.m. in Oslo. Versus the dollar, it dropped 1.6 percent to 6.1442. It was the biggest loser of the major currencies tracked by Bloomberg.

Source: Bloomberg

Published: August 11, 2013