Norwegian municipalities are facing financial challenges due to rising costs, which affected budgets, debt, and cash balances in 2024, according to a report published by Nordic Credit Rating (NCR) today. The central bank's policy rate remains high, impacting investment decisions and prioritizing public services over debt-financed projects. Despite some relief from proposed state budgets, operating margins have declined, particularly among the largest municipalities, with only a few showing improvement.
"Mounting financial and operational costs strain Norwegian municipal finances," said NCR credit analyst Anine Gulbrandsen. "Financial reserves continued to decline in 2024."
The financial strain is evident in the depletion of reserves, as municipalities utilise them to uphold service standards amid rising costs and modest revenue growth. While some municipalities have managed to bolster their reserves, many have seen significant reductions due to one-time expenses and debt repayments. The ROBEK register has seen an increase in listed municipalities since end-2023, but the number of registered municipalities remains low by historical comparison.
Debt levels remain high, with a slight decrease in gross debt burden among smaller municipalities, but an increase among the largest ones, driven by investments to accommodate population growth. Cash balances vary, with some municipalities maintaining healthy reserves, while others report minimal balances. Interest burdens have increased across all municipalities due to refinancing and rising loan costs, although some have mitigated this through interest income.
Contacts:
Anine Gulbrandsen, analyst, +4797501657, anine.gulbrandsen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com