Reykjavík reports 3.2 billion króna operating deficit

Reykjavík City’s A-part operations recorded a deficit of 3.2 billion krónur in the first six months of 2026, 3.2 billion krónur worse than during the same period last year, according to mbl.is.

The city council reviewed the interim financial statements for January through June on Thursday. Reykjavík said both the city’s consolidated operations and city treasury were running at a deficit, with efficiency measures intended to address the shortfall.

The city said economic uncertainty remained high, while conditions in Iceland’s domestic labour market were difficult. Inflation expectations were still above target, and there was a risk that inflation would exceed forecasts.

5.5 billion króna deficit across A and B parts

The combined operating result for the A and B parts was negative by 5.5 billion krónur, a deterioration of 10.6 billion krónur from the same period in 2025. The budget had projected an operating surplus of 6.7 billion krónur.

A negative 2.3 billion króna revaluation of Félagsbústaðir’s investment properties affected the result. Net finance costs totalled 19.7 billion krónur, 5.6 billion more than in the first six months of last year.

The consumer price index rose 3.74 per cent from the start of the year, compared with a projected increase of 1.75 per cent. Depreciation was also 2 billion krónur above budget, partly because of additional depreciation on properties scheduled for demolition, cancelled projects such as the seal pool at Reykjavík’s family park and zoo, and nursing homes previously jointly owned by the state and city that were transferred to the state on 1 January. Their book value was written down in accordance with Act No. 40/2025.

Net finance costs in the A and B parts amounted to 3.9 billion krónur, 1.9 billion above budget, mainly because inflation was higher than expected. Dividends from equity holdings totalled 3.3 billion krónur, while interest expenses and indexation amounted to 7.6 billion, 2 billion above budget.

Cash flow from operations was 8.6 billion krónur, equivalent to 7.9 per cent of the period’s revenue.

Reykjavík Mayor Hildur Björnsdóttir said the results clearly showed the importance of bringing the city’s finances under control, adding that nothing threatened basic services more than irresponsible operations.

“We will continue our work in the efficiency group and focus on increasing efficiency, reducing waste and improving services,” Björnsdóttir said.