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Strong Norway Economy Allows $100M Defense Budget Boost

Oct. 16, 2012 - 08:32PM   |  
By GERARD O’DWYER   |   Comments
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HELSINKI — Norway continues to buck the trend regarding budgetary defense spending in Europe. Buoyed by petroleum profits that will deliver a budget surplus of $43.7 billion in 2012, the government has proposed a 3 percent increase in the defense allocation for 2013, raising expenditures to $7.3 billion.

The government’s final budget is due to be voted on by the national parliament, the Storting, in December.

In effect, the government is allocating an additional $100 million to the 2013 defense budget. Around $52.5 million represents an actual increase in spending over the amount set in the 2012 budget. The military will also benefit from a capital transfer of $47.5 million to the 2013 core defense budget. These monies represent gains from military savings programs that will be redistributed to core Army, Navy and Air Force units.

The increase in military spending is all the more relevant given the general contraction in defense budgets across European countries, and is pitched higher than any of Norway’s Nordic neighbors, including Sweden. The Swedish core defense budget for 2013 is unchanged from the 2012 level of $6 billion.

By contrast, Denmark and Finland will see budget declines in 2013. The Danish defense budget has been set at $3.98 billion for 2013, down from $4.01 billion in 2012. Finland’s core defense budget will decrease to $3.07 billion in 2013, compared with $3.3 billion in 2012. The cuts in spending are slated to continue, with the annual allocation to the armed forces due to be reduced by $325 million by 2015 compared with the 2011 budget allocation.

Norway’s elevated defense spend will mean more immediate access to core funding for the Army, Navy and Air Force, with a higher percentage of the defense budget targeting improved readiness, High North defense structures, training programs and cyber defense.

The specific priority areas for higher capital investment spending were included in the Long Term Plan for the Armed Forces, which was approved by the Storting in June.

The 2013 budget allocates $300 million in new spending to fund the lead-in stage of the F-35 Lightning 11 acquisition program, while about $1.5 billion will be used to cover new and existing military equipment procurements, including the purchase of tactical helicopters.

Norway’s budget requirement for 2013 will be partly funded by profits from the so-called Government Pension Fund-Global, which had a market capitalization of $600 billion at the end of September. Rather than investing pension monies, the fund almost exclusively invests the state’s robust profits from the country’s extensive oil and gas sector.

“Despite a difficult global economic environment, the Norwegian economy continues to do well. The health of our economy means that we can afford to spend more on defense,” said Finance Minister Sigbjørn Johnsen.

The 2013 budget also sees increased funding to expand the military’s role in running improved anti-terrorism and national cyber defense structures and projects. A specialist Cyber Defense Force has been established in collaboration with the Armed Forces Military Intelligence agency.

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