Expert Commission reports on the application of the fiscal rule

The commission’s chair, Professor Øystein Thøgersen, delivered the report to Finance Minister Siv Jensen today. The commission was tasked to consider how to apply the fiscal rule in a situation when the Government Pension Fund Global (GFPG) is large and fluctuates widely in value. The commission was also asked to take into account the interests of future generations and the various challenges facing the Norwegian economy in the short and long term.

The fiscal rule was introduced in 2001, and governs the spending of the Norwegian Government’s petroleum revenues. The Government Pension Fund Act stipulates the transfer of the State’s net cash flow from petroleum industry to the Government Pension Fund Global. The fiscal rule specifies that the transfers from the Fund to the central government budget shall, over time, follow the expected real return on the Fund, which is estimated at 4 per cent. The fiscal rule also puts emphasis on evening out economic fluctuations to contribute to sound capacity utilisation and low unemployment, e.g. by allowing automatic stabilisers to play out fully.

- The Government’s fiscal policy is based on the fiscal rule for spending petroleum revenues. Today, spending is substantially lower than the expected real return. In this context, the fiscal rule gives less guidance for fiscal policy in the short term. With a large fund the 4 per cent path may shift significantly from one year to the next. The commission gives us advice on how the fiscal rule should be applied in such circumstances, says Finance Minister Siv Jensen.

- The commission was established in order to examine how the fiscal policy framework could be strengthened and adapted to current circumstances. The report is a helpful contribution to this work. I look forward to thoroughly studying the commission’s assessments, says Finance Minister Siv Jensen.

The Ministry of Finance will shortly issue a public consultation on the commission’s report.

Please refer to the commission’s own press release for further information about Official Norwegian Report 2015:9.

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