Donor Profile: Norway

Last updated: December 23, 2022

Summary



ODA Spending


ODA in Context

Norway was the tenth-largest donor country among members of the OECD DAC in 2021.


Norway is, however, the second-largest donor in proportion to the size of its economy: the country spent 0.93% of its GNI on ODA in 2021.


There is a cross-party consensus for Norway to return to a 1% ODA/GNI ratio.




Norway has managed to meet the 1% commitment every year since 2013, except in 2018 and 2021. In both years, the government fell short of reaching the target, because GNI grew more than originally expected during the budgeting process in the previous year. In 2022, it is expected that the ODA level will be at 1.17% of GNI. The Centre-Left government in Oslo proposed a historic reduction in ODA to 0.75% of GNI for the 2023 budget. However, this proposal was abandoned in December 2022 after thorough parliamentary negotiations with the SV. Following the agreement with the SV, the government is now expected to maintain ODA at 1% of GNI and is planning to top up the government’s development budget proposal for 2023 with a comprehensive package to Ukraine.


ODA decreased by 12% between 2020-2021, driven by high inflation (15% based on OECD statistics) due to an increase in raw materials such as oil and gas, electricity, and fish, of which Norway is a large producer. In 2015 and 2016, in-country refugee costs strongly impacted Norway’s ODA volume. In the 2022 budget, they stood at 1% of total ODA, well below peak levels (18% in 2016).


With soaring petroleum revenues in the wake of the war in Ukraine, Norway's economy continues to grow, and the gap between economic growth and the levels of funding for international development assistance may persist into 2023.


For 2023, the government’s proposal set the ODA budget at NOK43.8 billion (US$4.5 billion), and reach 1% of estimated GNI. The budget proposal reflects the situation caused by the full-scale war in Ukraine. Humanitarian assistance, efforts to combat hunger and climate change, and increased efforts to promote women' s rights will receive priority. In light of the government’s decision to keep the ODA/GNI ratio at 1% in 2023, the government agreed on a compromise to top-up of the 2023 budget with a long-term funding package for Ukraine and low-income countries affected by the war. The additional funding will be part of the regular budget. While it is currently unclear how much funding will be set aside and where the money will be sourced from, the government will publish further details on the spending package in a framework in spring 2023.


In past years, high costs of hosting refugees in Norway (some of which are ODA -eligible) have impacted Norway’s overall ODA volume in two major ways. First, funds were reallocated from development programs, and second, reported ODA increased, driven by additional refugee-related costs outside of the ODA budget. In-country refugee costs have recently decreased from their peak at 18% of ODA in 2016 to between 1- 2% from 2018-2021. Due to the full-scale Russian invasion of Ukraine, the government has decided to increase the use of ODA for refugee-related projects. Based on current statistics and numbers presented by the government, these estimated costs will make up around 3.7% of ODA in 2023. However, the numbers are expected to remain low going forward.


According to the Minister of Foreign Affairs, between half and two-thirds of the projected ODA budget for 2021-2025 have already been earmarked due to the government’s many multi-year commitments, leaving little flexibility within the budget in upcoming years.



ODA Breakdown


Norway is a strong supporter of multilateral organizations. In 2020, it channeled 25% of its ODA as core contributions to multilateral organizations, significantly below the 42% average among members of the OECD DAC; however, in 2020, Norway channeled another 34% of its ODA in the form of earmarked funding through multilaterals (reported as bilateral ODA to the OECD).


Alongside multilaterals, CSOs are key implementers of Norwegian ODA. In 2020, 27% of Norwegian bilateral ODA was channeled through CSOs (DAC average: 19%).


In recent years, private sector development and job creation have become more important to Norway’s development cooperation. Much of Norway’s support for economic development goes through Norfund, a state-owned investment fund supporting private-sector activities in partner countries, whose investments are not ODA -eligible.


Since 2014, Norway has provided all its bilateral ODA in the form of grants.



Bilateral Spending


Norway’s strategic priorities are largely reflected in its bilateral funding allocations. In 2020, 15% (US$473 million) of bilateral ODA went to humanitarian assistance. The sector to receive the second-largest share of bilateral ODA was government and civil society (12%, or US$380 million). These were closely followed by funding for projects supporting health and populations (12%, or US$374 million), and environmental protection (11%, or US$358 million).


The trend is set out to continue in 2023, when the government has decided to increase its funding towards the following areas: humanitarian assistance, efforts to combat hunger and climate change, and increased efforts to promote women’s rights. This is also in line with what is mentioned in the “Hurdalen” platform, the coalition agreement that outlines the overarching direction of the government to the parliament for the period between 2021-2025.


Norway’s ODA is mostly directed towards LICs, as defined by the DAC, although this is not immediately evident from the ODA data. Because a large share of Norway’s ODA is channeled as earmarked funding to multilaterals to support CSOs and go toward in-country refugee costs, 55% of Norway’s bilateral ODA in 2020 was not allocated to a specific income group. This means that LICs officially accounted for only 22% of bilateral ODA in 2020. However, when only considering bilateral ODA allocated to a specific income group, LICs received 50% of bilateral ODA.


Multilateral Spending and Commitments


Norway’s government considers funding through multilateral organizations an effective way to pursue its priorities. Norway supports multilateral organizations both through large core contributions (US$1.1 billion, or 25%, of its total ODA in 2020) and through significant earmarked funding amounts channeled through multilateral organizations for specific sectors or regions (US$1.4 billion, or 34% of total ODA). This brings Norway’s total multilateral ODA to US$2.5 billion, or 59%, of its total ODA, putting it just above the OECD DAC average of 56%. Funding channeled through multilateral institutions has increased by an annual average rate of 7% between 2015 and 2020 (US$1.8 billion in 2015). According to Norad’s 2021 statistics, this share remained stable at 58% in 2021. Guidelines for Norway’s multilateral policy were published in 2019 in an MFA white paper entitled ‘Norway’s Role and Interest in Multilateral Cooperation.’


Norway has been a strong supporter of the UN system. UN agencies received 38% of Norway’s core contributions to multilateral organizations in 2020. 15% went to the World Bank, and 11% to regional development banks. The current government strongly supports vertical funds, especially in the global health sector.


Recent commitments to multilateral organizations are summarized below.



Politics & Priorities


Political Context


Norway is a parliamentary democratic constitutional monarchy. Political power is divided among the cabinet, called the Council of the State, which is overseen by the prime minister; the legislature, or Storting; and the judiciary, which is independent of the other branches. There are elections for the Storting every four years. The five dominant political parties are the Labour Party, the Conservative Party, the Centre Party, the Progress Party, and the Socialist Left Party.


Jonas Gahr Støre is the current prime minister of Norway and has been in office since October 2021. The AP and SP are part of the coalition government and have both been in power since the general elections in September 2021.

Main Actors


Click for more details on each actor.


Development Priorities


Norway’s development policy priorities are spelled out in the MFA’s white paper, ‘Common responsibility for a common future – the Sustainable Development Goals and Norwegian Development Policy,’ published in 2016. They include:

  • Education;
  • Global health;
  • Humanitarian assistance;
  • Private sector development, agriculture, and renewable energy; and
  • Climate change, environment, and oceans.

The new government, in place since September 2021, spelled out their priority areas for development policy in the ‘Hurdalen platform,’ the coalition agreement published in October 2021, that outlines the overarching direction of the government to the parliament for the 2021-2025 period. These areas include:

  • Climate and clean energy;
  • The fight against hunger;
  • The fight against inequality;
  • Women’s rights;
  • Humanitarian assistance; and
  • The fight against infectious diseases.

Detailed strategies for Norway’s development policy are expected to be drafted in late 2022.


By issue


Climate change: The Norwegian government’s commitment to climate change, the environment, and oceans is reflected in its substantial funding for this issue. One of the government’s largest development programs is NICFI, through which it has pledged up to NOK3 billion (US$319 million) per year to reduce deforestation. Funding for this program comes from the Ministry of Climate and the Environment. Norway is also a strong supporter of multilateral organizations for climate. In 2020, the government announced a doubling of its annual contribution to the GCF between 2020 and 2023, reaching a total of NOK3.2 billion (US$340 million) for the entire period and making it the third-largest donor per capita.


In May 2022, Norway’s new Climate Investment Fund also became operational. The fund is described as one of Norway’s most important tools in accelerating the global energy transition by investing in renewable energy in low- and middle-income countries that have large emissions from coal and other fossil power production. The fund will be capitalized with NOK2 billion (US$212 million) each year for the next five years and will be managed by Norfund.


Read more about Norway’s ODA to Climate


Education and gender equality: The former government under Prime Minister Erna Solberg placed a strong focus on education, particularly for girls and women. Between 2013 and 2017, funding to the sector doubled and has remained high since. The new government under Prime Minister Gahr Støre is committed to working on the goal of providing at least NOK 3.4 billion (US$361 million) to education between 2022 and 2026. Within education, priority areas include, enhancing opportunities for women and girls to complete high-quality and free primary and secondary schooling; gender-equal access to higher education (including university education) and quality technical and vocational training; and learning opportunities for children in crisis and conflict situations. Norway provides strong support to GPE. It committed NOK3.7 billion (US$435 million in 2021 prices) for 2021-2025, and is currently the fourth-largest donor.

Norway considers education as a core component of its humanitarian assistance policy and shows international leadership in the area. It is one of five founding donors to ECW initiative, a special fund launched in 2016 that aims to improve access to education services in humanitarian emergencies and crises. In total, Norway has contributed US$83 million to the fund. In 2020, it announced an additional NOK20 million (US$2 million) for ECW to support the education of children and youth impacted by the COVID-19 crisis.


Read more about Norway’s ODA related to Education


Read more about Norway’s ODA related to Gender Equality


Global health: Global health has been a longstanding priority for Norway, and Norway’s commitment to the sector has been reinforced by COVID-19. The ‘health’ budget line within Norway’s ODA budget, stands at NOK3.8 billion (US$415 million) for 2022. According to Norad’s 2021 statistics, Norway’s contributions towards health-related ODA, including core support for multilateral organizations, stood at NOK7.9 billion (US$489 million) in 2021. NOK2.9 billion (US$308 million) of that went toward fighting COVID-19 and its impacts in LICs. In the fall of 2019, the government launched its strategy ‘Better Health, Better Lives,’ which focuses specifically on combatting non-communicable diseases within its development cooperation (applicable from 2020-2024).


Read more about Norway’s ODA for Global Health


Agriculture: Food security and agriculture is highlighted as one of the main priorities within the international development policy for the current government. The “Hurdalen” platform points out that the government wants to make the fight against hunger and food security a priority area with a special focus on sustainable small-scale production and climate-smart agriculture. In the 2023-budget, NOK1.7 billion (US$175 million) has been allocated to this budget line, which lies in the budget envelope for ‘Business development, agriculture and renewable energy’. In November 2022, the government launched a new strategy on food security: ‘Gathering power against famine - a policy for increasing self-sufficiency,’ which focuses on local and national food security through investments in small-scale food producers, their value chains and climate-robust development.


Read more about Norway’s ODA for Agriculture


By region


’Sub-Saharan Africa’: Geographically, SSA receives by far the largest share of Norway’s bilateral ODA (23% in 2020), followed by the MENA region (11%), and Asia (9%). Funding to the MENA region nearly doubled between 2013 and 2015, plateauing at a high level ever since.


According to MFA’s 2017 ‘white paper on the Sustainable Development Goals,’ Norway focuses its bilateral cooperation on 16 countries, with the aim of pursuing a holistic and cross-sectoral approach to development in each of its partner countries. It outlines two categories of partners:

  • Partners for long-term development cooperation, with which Norway already has long-standing engagement: Colombia, Ethiopia, Ghana, Indonesia, Malawi, Mozambique, Myanmar, Nepal, Tanzania, and Uganda.
  • Partners for stabilization and conflict prevention with a holistic and long-term perspective, as Norway aims to reinforce its overall efforts in vulnerable states: Afghanistan, Mali, Niger, Palestine, Somalia, and South Sudan.

Political Outlook

Norway’s commitment to spend 1% of its GNI on development cooperation means that increases in ODA are closely linked to Norway’s economic growth. The government, put into place in September 2021, is committed to spending 1% of its GNI on development cooperation. The government's proposal to reduce ODA/GNI ratio to 0.75% in 2023 was pushed back by the SV. Therefore, Norway continues to rank highly on the OECD list of donors based on their proportion of GNI allocated to ODA.


In October 2022, the government presented its proposed budget for 2023, which outlines a development assistance budget of NOK43.8 billion (US$4.7 billion). In addition to the 2023 budget, the government decided to publish a framework for a top-up of the budget with funding to Ukraine and low-income countries affected by the consequences of the Russian war of aggression in Ukraine in spring 2023 to meet the 1% ODA/GNI target.


Budget


Budget breakdown


The ODA budget for 2023 stands at NOK43.8 billion (US$4.7 billion). Together with the top-up of funding for Ukraine and countries affected by the war this will result in abbr:ODA reaching 1% of Norway’s projected GNI in 2023. More details on the additional funding will be published in spring 2023. The existing budget already includes an increase in spending on humanitarian assistance, efforts to combat hunger and climate change and increased efforts to promote women's rights. In addition, a new budget line for refugees, internally displaced people, and host communities has been established with a special focus on the full-scale Russian invasion of Ukraine. The new budget line has been allocated NOK2.8 billion (US$293 million).


Due to the new budget line, in-country refugee costs are decreasing greatly compared to the 2022-revised budget (NOK1.62 billion, or US$172 million). The budget line on humanitarian assistance also decreased by 32% compared to the 2022-balanced budget. This is due to a reallocation of funding to the new budget line for refugees.


The budget proposal is largely driven by the need to address the consequences of the Russian invasion of Ukraine, including the intensifying global food security crisis and increased numbers of refugees.


There was also an increase in funding towards ‘business development, agriculture, and renewable energy,’ including funding for food security. These are top priorities within the ODA budget for 2023. NOK5.5 billion (US$581 million) is allocated to this budget line in 2023. Following an increase in 2021 due to COVID-19 response, the health budget remains at a high level in 2023 even though it slightly decreased compared to 2022.


ODA comes from two main sources: MFA and the Ministry of Climate and Environment. According to the Minister of Foreign Affairs, between half and two-thirds of the projected ODA budget for 2021-2025 has already been earmarked through multi-year commitments. This leaves little flexibility within the budget in upcoming years.


MFA provides 93% (NOK40.6 billion, or US$4.3 billion) of the ODA budget. The MFA’s ODA budget provides detailed information on the allocation of funding and can be divided into four major categories: 1) thematic cooperation, 2) bilateral cooperation, 3) multilateral funding (outside of specific thematic cooperation), and 4) administration costs.



Budget Process


The budget process runs over a two-year period. Preparatory work starts about a year before the actual fiscal year and the ongoing budget may be amended in March/April and in August.
  • Ministries prepare initial internal budget drafts: From November to the end of January, Norway’s development agency, Norad, and Norwegian embassies prepare budget input to submit to the relevant ministries, which in turn start their preparations for developing their budget for the following year. Budget suggestions by the ministries are due by January 25 each year. Key stakeholders during this period are senior staff at the Norwegian embassies, Norad, and senior officials from MFA.
  • First budget conference – government decides on indicative ministerial budget ceilings: By March, Norwegian embassies and Norad have prepared their preliminary internal budgets. MFA and Norad leadership ultimately make decisions on budget allocations. In parallel, embassies start identifying bilateral projects for the coming year. Ministerial budget proposals are presented to the government at its first budget conference around March 10, when the government sets indicative budget ceilings for each ministry. Budget ceilings are handed out around March 20.
  • The MFA further refines internal budgets: Once the government has set the MFA’s indicative spending, MFA further develops its budget from April to July/August.
  • Second budget conference – government makes final decision on overall draft budget: Usually in late August/September, the government holds its second budget conference to agree on final ministerial budget caps and political priorities. At this stage, the government approves the overall ODA volume and funding for major initiatives. It usually does not debate further details of the ODA budget.
  • The government presents its budget proposal to Parliament: Around September 20, the government approves its ‘Yellow Book’, its first budget proposal. At the beginning of October, the budget proposal is presented to Parliament. From October to December, MFA and the other ministries adapt their budget draft to fit within the final caps.
  • Parliament debates draft budget: From October to November, Parliament debates the government’s budget draft. The Standing Committee on Finance and Economic Affairs can amend the proposed ceilings and detailed allocations for main expenditure areas until November. The Standing Committee on Foreign Affairs and Defense may propose amendments, but in practice, the Committee on Finance leads reallocations between budget lines. The additional proposals need to be presented by November 10.
  • Parliament approves budget: By mid-December, the Parliament signs off on the budget for the upcoming year.


Issue Deep-Dives

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Clara Brettfeld

cbrettfeld@seekdevelopment.org

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