OSLO, May 12 — Norway will sharply raise spending this year from its trillion-dollar sovereign wealth fund, the government said today, exceeding a self-imposed cap for the first time in over a decade to aid an economy reeling from the novel coronavirus crisis.

Cash withdrawal from the fund is now projected to hit a record 419.6 billion Norwegian crowns (RM177.44 billion) in 2020, the Finance Ministry's mid-year fiscal review showed, up from 243.6 billion crowns seen last October.

The so-called structural non-oil deficit thus corresponds to 4.2 per cent of the fund's January 1 value, the government said, making use of a provision in its fiscal framework that allows withdrawals to exceed a 3 per cent cap to counteract economic setbacks.

In its original budget the government had planned to spend just 2.6 per cent of the fund.

"To counter the economic fallout of the virus outbreak the Government has introduced sweeping measures in successive rounds,” the finance ministry said in a statement.

The extra spending will pay for a tax shortfall and a range of initiatives announced since a partial lockdown of the country began on March 12, including extra unemployment benefits, cash support for companies and oil industry investment incentives.

Norway in recent weeks began a gradual reopening of its economy as the rate of Covid-19 infection declined, and has said the revised budget will be followed in late May or early June by a long-term recovery roadmap.

The economy will likely contract this year by 4.0 per cent, the ministry predicted, and last week the central bank cut its key policy rate to zero percent for the first time. — Reuters