From 2014 until 2021 Norges Bank primarily bought NOK with foreign currency from the GPFG (Norway's Government Pension Fund Global) to cover the non-oil budget deficit. As of 2022 this is no longer the case and Norges Bank is selling NOK in large volumes in order to buy foreign currency to be stored in the GPFG.

This is happening because of the all time high budget surplus of 25.6% of GDP from 2022.

Here you can see the transaction volumes for each month in the past 24 years: https://www.norges-bank.no/en/topics/Statistics/foreign-exchange-transactions-daily/

And here's the explanation for the whole thing: https://www.norges-bank.no/en/topics/liquidity-and-markets/Foreign-exchange-purchases-for-GPFG/

Until 2014, the revenues in NOK from petroleum activities exceeded the non-oil deficit. Norges Bank therefore sold NOK and purchased foreign exchange equal to the difference and transferred that amount of foreign exchange to the GPFG. Through most of 2014, the government's revenues in NOK were approximately as large as the non-oil budget deficit, and Norges Bank did not carry out any foreign exchange transactions on behalf of the government. From the end of 2014 up to and including 2021, the non-oil budget deficit exceeded the revenues in NOK from petroleum activities, and some of the government's foreign currency revenue had to be converted to NOK in order to be spent via the budget.

tl;dr: Norway's economy is strong but the government is aggressively saving money for a rainy day by buying foreign currencies and storing them in the GPFG. This is lovering the value of the NOK which, in turn, leads to inflation because most consumer goods are imported and paid for using foreign currencies.

And, since the budget surplus is stabilizing at around 13% of GDP for 2024, it's expected that Norges Bank will slow down its NOK selling spree which will also lead to a more stable NOK.

The interest rate has already stabilized at 4.5% and it's expected that it will be lowered so that people can buy homes without crazy high monthly payments to the bank. 🙂

by adevland

5 comments

  1. okay okay but,

    answer the real question that people wanna know

    are we gonna start makin’ more money soon or what?

  2. What makes you think that the selling of NOK by Norges Bank has a much stronger influence on the exchange rates than the buying of even larger amounts of NOK by the oil companies that need to pay their taxes in NOK?

  3. Why are you leaving out the critical fact that Norges Bank is simply on the receiving end of excess tax revenue that has been paid by the petroleum firms by selling foreign exchange and buying NOK? 

  4. You should do a simple relative peer analysis of plotting the USD/NOK vs USD/SEK vs USD/DKK you’d see that the trajectory is similar to all three currencies except the DKK which has a euro peg if I recall correctly.

    Given how different the economies of Sweden and Norway are yet you have similar FX performance this shows that this is probably due to global macro influences rather than country specific factors.

  5. And all the nok being sent out of country, by foreign workers, and norwegian billionaires

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