Norwegian Prime Minister Erna Solberg. Picture: REUTERS
Norwegian Prime Minister Erna Solberg. Picture: REUTERS

Oslo — Norway made the first deposit to its $1-trillion wealth fund since 2016 as climbing oil prices and a recovering economy again swell its coffers.

The finance ministry put 1.9-billion kroner ($230m) into the fund in June, cutting withdrawals in 2018 to 7.9-billion kroner, according to the Norwegian Government Agency for Financial Management. In its most recent budget released in May, the government had anticipated it would take out 21-billion kroner in 2018.

In 2016, Prime Minister Erna Solberg became the first Norwegian leader to dip into the massive piggy bank after the price of oil plunged, sending Norway’s oil industry into its worst crisis in a generation. Norway’s biggest industry and the economy are now on the mend after crude has recovered to above $70 per barrel from below $30 at the worst of the crisis.

The fund, which invests abroad to avoid stoking domestic inflation, has been tapped for about 150-billion kroner since early 2016 to plug budget deficits. With cash-flow of more than 200-billion kroner a year from bonds, stocks and real estate, it has been more than able to handle the withdrawals. The fund has even surged in size during the past years, hitting more than $1-trillion in 2018 amid rallying global stock markets.

The deposits are mainly "a result" of the higher oil price and a sign that the Norwegian economy is doing better, said Kristoffer Kjaer Lomholt, an analyst at Danske Bank.

It can also be seen in that the central bank has been reducing its purchases of kroner, he said. But the implications for the currency will be limited since any drop off in demand will likely be picked up by buying from oil companies, Lomholt said.

As deficits grew and the government used more and more oil cash, the central bank was forced in 2014 to start converting foreign currency oil revenue into kroner for the government.

The fund declined to comment and the finance ministry had no immediate comment.