Norway's record budget: Boosting Ukraine aid and defense investments

This year's Norwegian government budget conference took place at a hotel near Oslo. The informal atmosphere of the discussions and the suburban setting are enduring traditions.

Support for Ukraine increased from 35 billion kroner (approximately £2.7 billion) to 85 billion kroner (approximately £6.6 billion) in 2025. This is a record amount allocated to both humanitarian and military goals. Prime Minister Jonas Gahr Støre announced consultations with European leaders and Ukraine's President, Volodymyr Zelensky, on the disbursement of these funds.

The decision regarding Ukraine was directly tied to the policy of using Norway's oil fund. Norway has the world's most significant state investment fund — exceeding £1.5 trillion.

In the 2025 budget, it is estimated that the total value of funds withdrawn from the fund will amount to around 420 billion kroner (approximately £32.8 billion), which accounts for 2.9 per cent of its value. It narrowly stayed below the maximum limit of 3 per cent as per the "Handlingsregelen," a rule that generates much excitement every year.

The funds will also strengthen the Norwegian Armed Forces. The defence budget is set to increase by 25 per cent compared to 2024, reaching 125 billion kroner. These funds will be used to purchase modern military equipment, modernise the air force base, and strengthen cooperation with NATO.

The oil fund provides Norway with financial security and is subject to strict regulations. In 2001, Jens Stoltenberg's government implemented the aforementioned "Handlingsregelen" ("action rule"), which determines the maximum amount the state can spend from the fund in a year. The limit is, as mentioned, 3 percent of the total value of the fund and is strictly adhered to. It faced significant public opposition during the pandemic.

This policy ensures that the oil fund grows rather than gradually depleting. Since 2015, its value has nearly doubled from approximately £777 billion to the current £1.5 trillion. At the same time, the government maintains a low level of public debt, which in 2024 amounted to only 40 percent of GDP, one of the best results in Europe.

Norway's budgeting system is based on transparency and long-term planning. After two days of government discussions, a parliamentary debate and interdepartmental consultations follow. Unlike other European countries, Norway does not engage in aggressive budget spending. Instead, its policy is based on cautious economic forecasts.

As a result, the budget deficit in 2025 is expected to be only 2.1 per cent of GDP, a better result than most EU countries.

The government also announced increased spending on the green transition. The budget for ecological projects will increase by 18 per cent compared to the previous year, reaching 55 billion kroner.

In addition to serious financial decisions, the budget conference has a social and symbolic dimension. Government members traditionally attend wearing characteristic clothing. The Prime Minister of Norway, Jonas Gahr Støre, published a photo on Facebook of government members wearing wool sweaters known as "lusekofte" and "setesdalskofte."

In the 1990s, equally popular were navy blue work shirts with "busserull" and folk accents. This is a tradition of budget conferences dating back to the 1970s. Gro Harlem Brundtland, three-time Prime Minister of Norway, attempted for several years to change it, but the custom endured. It is meant to symbolise the government's closeness to citizens and highlight restraint in managing the budget of one of the world's wealthiest countries.

For Norwegians, budget agreements are not only a time for strategic decisions but also a bit of entertainment in interpreting signals from the government and an opportunity to see in politicians' attire a manifestation of national identity and pragmatism. Norwegians like to remind themselves yearly and confirm how attached they are to their conservative and long-term strategy of building a common wealth.