Revised National Budget: Foreign Exchange Provides Increased Expenses for the Armed Forces
(Source: Norwegian Ministry of Defence; issued May 12, 2020)
(Unofficial translation by Defense-Aerospace.com)
The Norwegian defense ministry has warned that the weak krone is increasing the cost of the equipment it pays in US dollars and euros. The F-35, for example, has a 90-percent exposure to the US dollar, substantially increasing unit costs. (RNoAF photo)
A weak krone causes the Armed Forces significant additional expenditure on foreign currency. In the proposal for a revised national budget, the government therefore reallocates NOK 206 million internally to the defense budget to cover additional fuel and currency costs.

Even before the corona pandemic, a weak krone, especially measured against the euro and the dollar, caused significant additional currency expenditure for the Armed Forces. The corona pandemic has further strengthened the currency challenges, and the Ministry of Defense is continuously working to clarify the economic impact the pandemic has on the defense budget.

A large proportion of the Armed Forces procurement is paid in dollars and euros. The defense budget is therefore very exposed to currency fluctuations. The fighter acquisition, for example, has a 90 percent exposure to the US dollar. Other acquisitions that are significantly affected by the weakening of the Norwegian krone are new maritime patrol aircraft and new artillery to the Army.

A sustained weak krone will also affect the cost of the future planned acquisition of new submarines.

Fighter acquisition is on track

The fighter jets are being delivered on time, with better performance than expected and with a lower unit price than planned. At the same time, the equipment investment portfolio is heavily exposed to currency. The high exchange value of the US dollar has affected the payouts for acquisition. If today's currency situation with a weak Norwegian krone persists, this could have significant economic consequences for the acquisition of new fighter aircraft.

The fighter aircraft program is constantly working to reduce the costs and the effect of the cost-reduction measures has so far been very good. As an example, the unit price has gone down for each production series to date, and is expected to go down further in the upcoming production series.

The Ministry of Defense, according to the usual procedures, plans to submit updated status on the acquisition of fighter aircraft through the annual budget proposal to the Storting. Any consequences as a result of new currency estimates and new expected costs will also be presented there this fall.

Cold Response 2020

A total of NOK 166 million has been redistributed from central training resources in the Armed Forces to the Army, the Naval Defense, the Air Defense and the Home Guard in connection with participation in exercise Cold Response 2020.

Expenditure on the exercise Cold Response was somewhat lower than expected due to the exercise. cancellation of the last part of the country as a result of the corona situation.

Nevertheless, the savings for the Norwegian forces were minimal since the exercise was already underway when the decision to cancel was taken. Any saved funds will go to cover additional costs for corona measures and contributions to cover foreign exchange costs that have arisen as a result of the weakening Norwegian krone.

New joint ICT solution for the ministry community

In order to increase information security in the ministries, the government has decided that a common ICT solution should be used. The Ministry of Defense has been given responsibility for the migration of users to the Ministry of Defense's tier-level platform. The Ministry of Defense has allocated NOK 64 million in revised national budget to this task.

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