May 13, 2011 / 8:45 AM / 6 years ago

Norway curbs oil reliance in revised 2011 budget

OSLO, May 13 (Reuters) - Norway's government proposed a 2011 revised budget that reduces the structural deficit before oil revenues are considered to 112.9 billion Norwegian crowns ($20.43 billion) from 128.1 billion crowns seen in October.

The government said it was aiming to avoid a situation in which Norwegian interest rates rise faster than those in the euro zone so that the crown currency does not strengthen further.

Norway, the world's fifth largest oil exporter, runs big budget surpluses when petroleum revenue is counted but structural deficits without it.

By parliamentary consensus the oil money plugging the structural deficit in a "normal year" should be around four percent of the value of Norway's oil-based sovereign wealth fund, most of which is invested abroad.

In the 2011 revised budget the government ducks under the four-percent limit for the first time since 2008, before the financial crisis caused tax receipts to fall and the government to boost spending as economic stimulus.

The non-oil deficit is estimated to come in 10.3 billion crowns ($1.86 billion) below the guideline instead of 7.4 billion above as previously envisaged.

Non-oil GDP is now projected to grow 3.2 percent in 2011, compared with the 3.1 percent growth seen in October.

It sees the country's sovereign wealth fund, popularly called the oil fund, at 3.35 trillion Norwegian crowns at the end of 2011, compared with 3.36 trillion Norwegian crowns projected in October.

The revised budget proposal is based on on an average 2011 oil price forecast of 575 crowns per barrel, up from 485 Norwegian crowns in the government's October view. The Norwegian crown has strengthened in recent months.

Reporting by Oslo newsroom

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