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ECONOMY

Time to raise Swedish interest rate – Riksbank

Deputy Riksbank governor Irma Rosenberg said on Friday that the Swedish economy is growing stronger than expected in the last Inflation Report published in early December.

That will boost inflation, she said, and it is now time for the central bank to start hiking its governing interest rate, the repo rate.

“I therefore believe that there is reason, given the information we have today, to now take the first step towards normalising the level of the repo rate and thereby making monetary policy less expansionary. It would also entail a slight reduction in the stimulation effect on the housing market,” said Rosenberg in a speech in Sweden.

“All in all, I do not consider there to be reason at present to make any significant revision to our view of future inflation prospects; inflation can be expected to rise gradually towards the target of 2 percent when capacity utilisation increases in the wake of the strong growth rate,” she added.

AFP

ECONOMY

Sweden’s new right-wing govt slashes development aid

Sweden, one of the world's biggest international donors, is planning drastic aid cuts in the coming years, the country's new right-wing government said in its budget bill presented on Tuesday.

Sweden's new right-wing govt slashes development aid

Prime Minister Ulf Kristersson’s government said it planned to reduce the country’s international aid by 7.3 billion kronor ($673 million) in 2023, and by another 2.2 billion kronor in 2024.

That is around a 15-percent reduction from what had been planned by the previous left-wing government and means Sweden will abandon its foreign aid target of 1 percent of gross national income.

International aid for refugees will be capped at a maximum of eight percent of its aid, and will also be reduced.

According to the specialised site Donor Tracker, Sweden was the world’s eighth-biggest international aid donor in terms of absolute value last year, and the third-biggest in proportion to the size of its economy, donating 0.92 percent of its gross national income, behind Luxembourg and Norway.

The new government, which is backed for the first time by the anti-immigration Sweden Democrats, had announced in its government programme last month that it would be cutting foreign aid.

Since 1975, Stockholm has gone further than the UN’s recommendation of donating at least 0.7 percent of its wealth to development aid.

Despite its growth forecast being revised downwards — the economy is expected to shrink by 0.4 percent next year and grow by 2 percent in 2024 — the 2023 budget forecasts a surplus of 0.7 percent of gross domestic product.

It calls for an additional 40 billion kronor in spending, with rising envelopes for crime fighting and the building of new nuclear reactors, as well as a reduction in taxes on petrol and an increase in the defence budget.

The new government is a minority coalition made up of Kristersson’s conservative Moderates, the Christian Democrats and the Liberal party, backed in parliament by their key ally the Sweden Democrats to give them a majority.

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