(Adds detail, quote)
OSLO Aug 29 Norway's central bank will in the
future buy crowns for the government to use for its budget
spending, reversing its past practice of selling the Norwegian
currency, the central bank said on Friday.
The bank has in the past bought foreign currency on the
market, converting the country's vast oil tax income and giving
the cash to its $890 billion sovereign wealth fund -- commonly
known as the oil fund -- so it could buy stocks, bonds and real
But Norway's local currency tax income will no longer cover
budget spending and the government will have to dip into the
foreign currency tax income collected by Petoro, the holding
firm that manages the state's direct financial interests (SDFI)
in oil and gas licences.
The central bank will stay off the foreign exchange market
"Somewhat further ahead, the taxes in Norwegian crowns will
not be sufficient to cover the spending of petroleum revenues,"
the bank said in a statement.
"In the same way that Norges Bank has purchased foreign
exchange for the (oil fund), the bank will be selling SDFI
revenues in foreign currency on behalf of the government to
cover the non-oil deficit on the central government budget," the
Norway's government has been spending more and more of its
saved up oil wealth even though the spending, as a percentage of
the oil fund, it falling, as the fund is growing rapidly.
The state is allowed to spend up to 4 percent of the money
saved up in the fund each year but the actual spending will be
below 3 percent, even as it reaches a record high in nominal
(Reporting by Balazs Koranyi; Editing by Toby Chopra)