26
2 0 0 4 The 2004 Fiscal Budget 1 October 2003
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0 4
The 2004 Fiscal Budget1 October 2003
2 0
0 4Treasury revenue balance for 2004
estimated to be ISK 6.4 billionor ¾% of GDP
Highlights
Net Treasury financing balance for 2004 estimated to be ISK 13.7 billion
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0 4
Public Finances 2002-2004
ISK billions, current prices2002
Accounts2003
Budget2003
Estimate2004
Budget
Revenue ......................................... 259.21 274.2 277.18 279.42
Expenditure ................................... 267.33 264.8 271.0 273.03
Revenue balance ......................... -8.12 9.4 6.2 6.4
Net financing balance ................ -3.8 19.8 17.6 13.7
2 0
0 4
Revenue surplus excluding irregular items
Revenue in excess of expenditure -8.1 9.4 6.2 6.4
Irregular expenditure ......................... 26.3 8.5 8.5 8.7
Irregular revenue ................................ 11.7 12.9 13.0 0.5
Rev. surplus excl. irregular items 6.5 5.0 1.7 14.6
2 0
0 4
Treasury balance shows a year-on-year improvement of ISK 13 billion, reflecting greatly increased restraint in public finances
2 0
0 4
Medium-term Public Finance Programme 2005-2007
• National public works cut by ISK 5 billion over the next two years, then increased by the same amount 2007-2008
• Treasury surplus of at least 1¾% of GDP in 2005 and 1% in 2006
• Growth of public consumption slowed Annual growth max. 2% in real terms
2 0
0 4• Moderate growth in transfer payments
Annual rise in transfer expenditure no more than 2½% in real terms
• Tax cuts of approx. ISK 20 billion2005-2007
Medium-term Public Finance Programme 2005-2007
• Neither the Norðurál enlargement nor income from sale of assets are included in budget premises
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0 4
Medium-term Public FinanceProgramme 2005-2007
ISK billions, current prices2004
Budget2005
Estimate2006
Estimate2007
Estimate
Revenue ......................................... 279.4 300.0 312.8 319.7
Expenditure ................................... 273.0 284.7 303.2 325.4
Revenue balance ......................... 6.4 15.4 9.6 -5.7
Net financing balance ................ 13.7 7.2 8.5 -7.4
2 0
0 4
Economic assumptions
2 0
0 4
-1
0
1
2
3
4
5
6
%
New period of growth
2 0
0 4
Price levels remain steady
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
8,0
9,0
10,0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
%
2 0
0 4
Purchasing power grows
-10,0
-8,0
-6,0
-4,0
-2,0
0,0
2,0
4,0
6,0
8,0
10,0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
%
2 0
0 4
Low level of unemployment
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
8,0
9,0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
%
OECD
Iceland
2 0
0 4
Temporary rise in current account deficit
-12
-10
-8
-6
-4
-2
0
2% of GDP
2 0
0 4
Main assumptions for 2004
• Economic growth 3½%
• Purchasing power increase 2½%
• Price level rise 2½%
• Unemployment 2½%
• Current account deficit 3¼% of GDP
• ISK Index 125
2 0
0 4
Budget facts and figures
2 0
0 430.7
32.2
31.0
29.529.130.0
25
26
27
28
29
30
31
32
33
1999 2000 2001 2002 2003 2004
% af VLF
Treasury expenditure drops in real terms*
* Excl. irregular items
2 0
0 4
29.329.2
28.328.4
30.330.9
25
26
27
28
29
30
31
32
1999 2000 2001 2002 2003 2004
% af VLF
Treasury tax revenue almost unchanged
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Priority areas
• Allocations to seniors’ pensions increase by 17%
• Increased allocations to education, esp. to universities, upper secondary schools, research and Students’ Loan Fund
• Health care allocations increase by 8%
• Restructuring of research with expansion of research and technology funds
2 0
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Special measures concerning income and expenditure
• ISK 1500 million reduction in transfer payments
• Operating expenditure reduced by ISK 700 million
• New investment reduced by ISK 1500 million
• Additional revenue of approx. ISK 1000 million
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0 4
What has been accomplished?
2 0
0 4
Treasury debt
0
10
20
30
40
50
60
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
% of GDP
Total debt
Net debt
2 0
0 4
Reduced interest expenditure
-0.6 -0.9
-3.4-4.7
-6.2-7.7
-0.1
-10,0
-5,0
0,0
5,0
10,0
1998 1999 2000 2001 2002 2003 2004
ISK billions
2 0
0 4
Additional contribution to Civil Servants’ Pension Fund, with interest
65.3
55.0
45.2
34.0
17.3
7.90.0
0
10
20
30
40
50
60
70
1998 1999 2000 2001 2002 2003 2004
ISK billions
Imputed 5% interest 2003 and 2004
2 0
0 4
In summary
• Debt and debt service burden reduced
• Public finances applied to counter inflationary effects of heavy industrial projects
• Opening up possibilities for tax cuts 2005-2007
• Ensuring stability
2 0
0 4
The Budget itself and accompanying documentation is available on the Ministry’s
website: www.ministryoffinance.is
