The Norwegian Local Government Sector
The strong financial position of the Norwegian local government sector and the strict financial framework within which it operates make the sector a highly creditworthy borrower.
Norway’s Counties and Municipalities form an integral part of the national economy. A large part of welfare and infrastructure provisions in Norway are assigned to the Local governments.
Local governments receive a large proportion of revenue from central government transfers, in order to ensure a unified service delivery throughout the country.
The local government sector is responsible for welfare services such as health care, education, transport and infrastructure.
Borrowings may only finance primary municipal investments. No commercial projects or guarantees for private-sector third parties are permitted.
There are three levels of government in Norway responsible for the provision of social services and infrastructure. KBN's clients are the counties and municipalities.
Norwegian Local Government Sector
Norway is divided into 11 counties (fylker), which are split up into 356 municipalities (kommuner).
More than half of the municipalities have fewer than 5,000 residents. 13 municipalities have over 50,000 residents.
The total revenue of the local government sector was estimated for 2025 to be NOK 1000 billion. This is equivalent to around 18% of Norwegian GDP.
The local government sector employs approximately 20% of the country’s workforce.
The local government sector is responsible for welfare services such as health care, education, transport and infrastructure.
Municipalities and counties are subject to strict central government control, regulation and supervision.
Municipalities and counties are not permitted to be declared insolvent.
There are three levels of public administration charged with providing for the needs of the population in Norway. The Central government and the local government authorities which comprise of two levels: counties and municipalities.
In Norway, the principle of local democracy is considered to be very important, but unlike several other European countries, this principle is not enshrined in the Norwegian constitution.
The legal framework for local government is laid down by the Norwegian Parliament through legislation and Parliamentary decisions. Parliament decides on the division of duties between the levels of local government authorities. In addition, the government can impose new duties on municipalities and counties. This means that Norway has more comprehensive centralised control of local government authorities than is the case in many other European countries.
All local government budgets and accounting processes are subject to extensive control by the Central government.
The legislative framework for the local government sector is stipulated in the Local Government Act of 25 May 1992.
Under the Local Government Act, counties and municipalities are prohibited from being declared insolvent, cf. Section 55. In addition, the legislation gives central government the authority to make changes to a local government's budget and financial plan in order to ensure that its activities are on a financially sound basis within a reasonable time. Counties and municipalities can not budget for an operating deficit, cf. Section 60.
It is extremely unlikely that a municipality or county could experience difficulties in meeting its liabilities, but in such a situation, the Central government would intervene to appoint a supervisory board, cf. Section 56.
The ROBEK List
The Register for Governmental Approval of Financial Obligations (ROBEK) is a government register of municipalities and counties experiencing an operating deficit. Local governments on this list must have any new borrowing explicitly approved by the state representative (Fylkesmann) in order to be valid. Entities on this list have 3 years to balance their budget. This list is publicly available.
The KOSTRA Registry
Since 1997, local and regional governments have been required by law to register statistics on budget, financial activities and public services in the KOSTRA (Municipality-State-Reporting) database. This registry is managed by Statistics Norway and provides key inputs for KBN’s credit risk management models.
