Government budget proposal turns eight-year deficit into surplus

The 2027 government budget proposal projects a surplus of ISK 5 billion, ending eight consecutive years of deficits, mbl.is reports.

The proposal says government revenues and spending will be brought into balance. It will be submitted to parliament when it opens tomorrow.

“The government treasury has been run at a deficit for eight consecutive years. We have now turned that minus into a plus and put public finances on a firmer footing,” Finance and Economic Affairs Minister Daði Már Kristófersson said in a statement.

He said the result was possible because spending growth was being restrained, government operations improved and public funds prioritised for welfare and essential services. Balanced budgets were not an end in themselves, he said, but a basis for reducing inflation and the burden of interest payments while ensuring that the government could provide important services in the future.

The proposal includes measures to improve the efficiency of government operations worth a total of ISK 44.2 billion. These include general spending restraint, reducing the number of government positions, more cost-effective public procurement, simplifying the administration and merging government institutions.

The spending restraint will be distributed according to the nature of each operation, the importance of essential services and the scope for greater efficiency. Health and elderly care institutions, schools, courts and law enforcement will therefore face smaller restraint requirements in order to protect day-to-day services to the public, the statement said.

At the same time, ISK 28.8 billion will be allocated to new and urgent projects intended to strengthen society.

Key priorities include additional funding for new nursing places, stronger healthcare institutions and shorter waiting lists. Support for children with complex needs will also be increased.

The proposal also includes a higher general tax-free income threshold for old-age pensioners and increased unemployment insurance payments. Universities will receive greater support, with additional funding for educational materials and STEM initiatives.

Funding for the road network and regional public transport will be increased. Additional investment will also go to policing, defence, prisons and secure residential facilities.