According to the International Monetary Fund's (IMF) 2005 Financial Sector Assessment Program (FSAP), Norway's fiscal policy framework is generally "prudent" and "transparent," and helps to maintain financial stability. Contributing to this stability is the Government Petroleum Fund (GPF, established in 1990), which is used to help insulate the Norwegian economy from wide fluctuations in oil prices. The IMF's 2007 Article IV Consultation report noted that an explicit medium-term fiscal framework would help to focus policy more on medium-term considerations. Norway already has many parts of such a framework in place, especially the fiscal guidelines and the finance ministry's multi-year budget projections. As a subscriber to the IMF's Special Data Dissemination Standard (SDDS) since 1996, Norway observes all SDDS requirements for timeliness, coverage, and periodicity in the data it provides. The 2006 Open Budget Index report for Norway, compiled by Dag Aames, rates Norway's budget process as "substantially open," providing the public with all but one of its recommended budget documents, and including a great deal of important budget information. However, the Aames report suggests that there remains some room for improvement.

General Overview

In its 2005 Financial Sector Assessment Program (FSAP) report, the International Monetary Fund (IMF) found Norway's monetary and fiscal policy frameworks to be "generally prudent and transparent" (p. 7). The report added that this, along with the Government Petroleum Fund (GPF, established in 1990), contributed to Norway's financial stability. The responsibility for fiscal policy development falls primarily upon Norway's Ministry of Finance (MoF), which must advise the political arm of the government (administrative and legislative branches) prior to their decision making and implementation. According to Dag Aarnes, writing for the International Budget Project's 2006 Open Budget Index (OBI) series, Norway's budget process is "substantially" open, scoring 72%. Norway produces six of the seven budget documents tracked by the OBI: Pre-Budget Statement, Executive's Budget Proposal, In-Year Reports, a Mid-Year Review, a Year-End Report, and an Auditor's Report. The only document not produced is the Citizen's Budget. Of the six produced, all but the Pre-Budget Statement are accessible to the public. The OBI report found that those documents which are publicly available are substantially, although not optimally detailed, suggesting some areas where improvements could be made. With regard to opportunities for citizen participation in the budget process, the OBI rated Norway's performance as "fair," noting that although public hearings are held on the budget, the hearings are "not extensive."

The Ministry of Finance website discloses that among the responsibilities of the Finance Minister is his role as developer and coordinator of the economic policy of the government. The Minister must offer expertise and advice to the parliament and executive branch prior to their final decision-making and policy implementation. In addition, the MoF must develop and oversee the system of taxation and monitor financial markets, as well as draft regulations when such are perceived to be necessary.

The IMF's Special Data Dissemination Standard (SDDS) website states that Norway became a subscriber on June 18, 1996 and posted its first metadata on the Dissemination Standards Bulletin Board (DSBB) that same year. According to the website, Norway observes all requirements for timeliness, periodicity, and coverage in the requisite datasets, provides advance release calendars where required, and makes summary methodologies available for all datasets included on the DSBB.

The IMF's 2007 Article IV Consultation report noted that since 2001, fiscal guidelines have specified the acceptable level of non-oil structural deficit (set at 4 percent of the Government Pension Fund, or GPF, formerly the Petroleum Fund). The report notes that although this deficit guideline has not yet been met in practice, it has served to keep deficit spending under control and has insulated the economy from shocks originating in the often volatile petroleum sector. "The policy of saving petroleum revenues abroad has blunted "Dutch disease" effects, but the deficit expansion under the guidelines warrants careful management. An explicit medium-term fiscal framework would help to focus policy more on such medium-term considerations", (p. 17) explains the 2007 IMF report, which adds that Norway already has many parts of such a framework in place, especially the fiscal guidelines and the finance ministry's multi-year budget projections. The report goes on to state that the 2007 fiscal year may see Norway achieving the guideline goal of 4 percent for the first time. The IMF's 2007 report suggests that, over the long-term, Norway's biggest fiscal policy challenge is likely to arise from the aging of its population. Parliament is considering certain pension reforms, but the IMF staff cautioned that currently contemplated reforms will likely not go far enough to address the problems to come. It suggested that additional reforms be taken under advisement.

In a May 2007 press release on the 2008 fiscal budget, the MoF declared that Norway enjoyed strong economic growth over the last four years. Low interest rates had contributed to a growth in domestic demand, and consumption had outstripped the growth in household income. A favorable export climate and petroleum sector investments further contributed to the pattern of economic growth. For 2007, growth in GDP was forecast to be 5 percent, but this was expected to fall to 2.75 percent in 2008. The unemployment rate was forecast to be 2.5 percent in 2007 and to hold steady at that level for 2008. The tightening labor market has yielded a growth in wages that is expected to reach 5 percent in both 2007 and 2008. This has led to price increases for domestic goods outside of the energy sector. According to the 2007 MoF press release, "adjusted for changes in excise duties and excluding energy, consumer price inflation (CPI-ATE) is forecast at 11/2 per cent in 2007 and 2 per cent in 2008." The oil sector, a significant part of the Norwegian economy, has been subject to considerable price fluctuation in 2007. The press release also states that "the projection in the National Budget 2008 is based on an oil price of NOK 400 per barrel in 2007 and NOK 360 in 2008." The non-oil budget deficit is proposed at NOK 76.8 billion, to allow for the prioritization of initiatives in healthcare, child daycare, and education, as well as initiatives in climate and environmental issues. This, in turn, will call for an NOK 5.4 billion increased reliance on oil revenues over the period from 2007 through 2008.

The Principles

Clarity of roles and responsibilities.

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According to the 2005 IMF FSAP report, Norway's monetary and fiscal policy is "generally prudent and transparent" (p. 7), and this, in combination with the GPF, helps to maintain Norway's financial stability. The government and the Norwegian parliament have accorded to the MoF the responsibility to develop fiscal policy, advise the government in the budget preparation process, and implement economic policy and the budget in particular. The MoF website adds that the ministry is responsible for the system of taxation and tariffs, as well as for the supervision of financial markets. The 2003 IMF ROSC data module adds that central government budgetary accounts are submitted annually to the parliament by the MoF in April, and that they are subject to audit by the Office of the Auditor General. However, the assessment does not directly address Norway's compliance with this principle.

In pursuance of its responsibility to draft fiscal policy guidelines, the MoF determined in 2001 that oil-sector income should be used to support broader fiscal policy, with the aim of stabilizing the economy. Non-oil revenues for the central and local governments are derived primarily from taxes and duties, which are applied toward the financing of socially desirable initiatives such as education, public works, healthcare, and pensions. More recently, according to the MoF website, climate and environmental initiatives have been added to this list.

Open budget processes

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According to the 2005 IMF FSAP report, Norway's monetary and fiscal policy is "generally prudent and transparent" (p. 7), and this, in combination with the GPF, helps to maintain Norway's financial stability. The 2003 IMF ROSC determined that government finance statistics were adequate to the needs of the government in preparing and monitoring the annual budget. However, most central government budget data were only made available seven times per year. The ROSC added that the MoF had recently begun providing monthly revenue, expenditure, and financing data to Statistics Norway, with a time lag of three to four weeks. However, the assessments do not directly address Norway's compliance with this principle.

The IMF's 2007 Article IV Consultation report noted that since 2001, fiscal guidelines have specified the acceptable level of non-oil structural deficit (set at 4 percent of the GPF). The report adds that although this deficit guideline has not yet been met in practice, it has served as to keep deficit spending under control and has insulated the economy from shocks originating in the often volatile petroleum sector. "The policy of saving petroleum revenues abroad has blunted "Dutch disease" effects, but the deficit expansion under the guidelines warrants careful management. An explicit medium-term fiscal framework would help to focus policy more on such medium-term considerations," (p. 17) explains the IMF in its 2007 Article IV Consultation report, adding that Norway already has many parts of such a framework in place, especially the fiscal guidelines and the finance ministry's multi-year budget projections.

According to Dag Aarnes, writing for the International Budget Project's 2006 Open Budget Index series, Norway's budget process is "substantially" open, scoring 72%. Norway produces six of the seven budget documents tracked by the OBI: Pre-Budget Statement, Executive's Budget Proposal, In-Year Reports, a Mid-Year Review, a Year-End Report, and an Auditor's Report. The only document not produced is the Citizen's Budget. Of the six produced, all but the Pre-Budget Statement are accessible to the public. The OBI report found that those documents which are publicly available are substantially, although not optimally detailed, suggesting some areas where improvements could be made. With regard to opportunities for citizen participation in the budget process, the OBI rated Norway's performance as "fair," noting that although public hearings are held on the budget, the hearings are "not extensive."

The MoF website describes its role within the government as "budget secretariat," responsible for coordinating the compilation of budget data and advising the government. In cooperation with other relevant ministries, the MoF prepares not only the national budget but the fiscal budget and the government's long-term macroeconomic framework. In the budget process, the government establishes policy priorities, then determines the total budget amount and allocates it to the relevant ministries in lump-sum amounts. Actual spending decisions are largely made by the individual ministries.

According to the MoF website, the first step in the budget process is the submission to parliament of a report in which the executive lays out its priorities for the upcoming budget year, along with its rationale for setting those priorities. A second report contains the total proposed budget, which details the allocation of funds to the various ministries. Over the course of October and November, these proposals are taken under review by the parliament's Standing Committee on Finance and Economic Affairs, which makes its own recommendations for expenditures and sets spending ceilings. The resulting document is debated by the full parliament, which either approves or amends the budget. Final approval of the budget occurs in December, to take effect on January 1 of the coming year. It is not uncommon for a budget to be amended during the course of the year to which it applies, according to the MoF website. These amendments tend to be most extensive in the spring, when the revised National Budget is produced, and in December, when the budget is subject to a final balancing. At the close of the budget year, the MoF prepares the government accounts for presentation to parliament in the following spring.

Public availability of information.

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According to the 2005 IMF FSAP report, Norway's monetary and fiscal policy is "generally prudent and transparent" (p. 7), and this, in combination with the GPF, helps to maintain Norway's financial stability. However, the assessment does not directly address Norway's compliance with this principle. The IMF SDDS website discloses that Norway subscribed to the SDDS on June 18, 1996. It first posted metadata on the Dissemination Standards Bulletin Board (DSBB) on September 19, 1996. According to the website, Norway meets SDDS specifications for timeliness, periodicity, and coverage on all datasets, but avails itself of the timeliness flexibility option for central and general government operations data and the periodicity flexibility option for central government operations data.

According to Dag Aarnes, writing for the International Budget Project's 2006 Open Budget Index series, Norway's budget process is "substantially" open, scoring 72%. Norway produces six of the seven budget documents tracked by the OBI: Pre-Budget Statement, Executive's Budget Proposal, In-Year Reports, a Mid-Year Review, a Year-End Report, and an Auditor's Report. The only document not produced is the Citizen's Budget. Of the six produced, all but the Pre-Budget Statement are accessible to the public. The OBI report found that those documents which are publicly available are substantial, although not optimally detailed, suggesting some areas where improvements could be made. With regard to opportunities for citizen participation in the budget process, the OBI rated Norway's performance as "fair," noting that although public hearings are held on the budget, the hearings are "not extensive."

The compilation and auditing of Norway's fiscal data are carried out according to accounting standards that are publicly disclosed, according to the 2003 IMF ROSC. The definitions and conceptual framework used in the compilation and reporting of government finance statistics are aligned with those of the 1993 System of National Accounts (SNA93) and the 1995 European System of Accounts (ESA). However, the 2003 ROSC cautions that the data "are not presented in a comprehensive and fully integrated fiscal analytical framework, and plans to fully adopt the analytical framework of Government Finance Statistics Manual, 2001 (GFSM 2001) have not been developed or documented" (p. 12). The MoF website makes publicly available a wide range of materials relating to fiscal policy, including Annual Reports, budget documents, press releases, the text of the Minister's public speeches and periodical reports.

Independent assurances of integrity.

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According to the 2005 IMF FSAP report, Norway's monetary and fiscal policy is "generally prudent and transparent" (p. 7), and this, in combination with the GPF, helps to maintain Norway's financial stability. However, the assessment does not directly address Norway's compliance with this principle. The IMF SDDS website discloses that Norway subscribed to the SDDS on June 18, 1996. It first posted metadata on the DSBB on September 19, 1996. According to the website, Norway meets SDDS specifications for timeliness, periodicity, and coverage on all datasets, but avails itself of the timeliness flexibility option for central and general government operations data and the periodicity flexibility option for central government operations data.

The IMF's 2003 ROSC reports that the Norwegian agencies responsible for data compilation, analysis, and application, which include the MoF, are both professional and transparent in the conduct of their activities, and make available to their staffs and the public a set of ethical guidelines. The report states that "each agency has well documented assurances of professionalism and impartiality in their work" (p. 3). In particular, the ROSC found that the compilation of government finance statistics is characterized by the qualities of professionalism, transparency, and ethics.