Icelandic government releases 2009 financial results

Iceland’s Ministry of Finance has today publicly released its treasury accounts for 2009, with a statement saying the figures are better than had been predicted.

The government’s accounts of it income and outgoings show that the authorities took more and spent less than had been anticipated during the difficult year 2009. The statement from the Ministry in its entirety can be read below:

The Treasury has now concluded preparation of its financial statements for 2009. The outcome shows that the difficult but necessary fiscal restraint actions applied last year are producing results. Objectives were set for fiscal policy and enforced through strict austerity measures, cut-backs in expenditure, restructuring, efficiency actions and increasing revenue generation for the Treasury. The Treasury finances comply with the government’s fiscal objectives and there are clear signs that gradual improvement is being achieved with a more positive performance than forecast, despite the sizeable deficit.

Treasury balance

The revenue statement shows a deficit of ISK 139 billion (bn), equivalent to 32% of revenue for the year and 9.3% of GDP. As the 2009 budget anticipated a current balance of ISK 173bn, the actual outcome was ISK 34bn above forecast. The explanation lies primarily in revenues of ISK 22bn in excess of estimates while expenditure was ISK 12bn below forecast.

Treasury revenue

Revenue in 2009 was almost ISK 440bn, compared to a 2009 budget forecast for revenue of just over ISK 417bn. Treasury revenue therefore considerably exceeded the forecast, as practically all revenue items exceeded budget estimates.

Treasury expenditure

Actual Treasury expenditure was ISK 579bn, compared to ISK 688bn in 2008. As budget authorisations totalled ISK 590bn, actual expenditure was almost ISK 12bn below budget.

The Treasury’s largest expenditure posts in 2009 were for healthcare, social security and welfare, and education. These items comprised over 51% of total expenditure. Expenditure on social security and welfare amounted to ISK 135bn or 23% of Treasury expenditure. Healthcare spending was ISK 117bn, or 20% of Treasury expenditure, and exceeded budget allocations for the year by almost ISK 3bn. Expenditure on education amounted to ISK 46bn or 8% of total Treasury expenditure.

Spending on economic and industrial affairs amounted to ISK 69bn, or 12% of total Treasury expenditure, with expenditure of ISK 26bn for road transport infrastructure the major item here. Irregular expenditure items amounted to ISK 36bn or 6% of total Treasury expenditure. Other state expenditures comprised 16% of total Treasury expenditure. These include major expenditures for cultural affairs, sports, religious affairs and law enforcement and security.

The Treasury’s financing cost was ISK 84bn in 2009 or some 14.5% of its total expenditure, which is a substantial increase over the previous year but over ISK 5bn lower than the budget estimate.

Financing cost

Financing needs proved to be considerably lower than estimated, or 11% of GDP rather than the forecast 25%. The discrepancy results in part from an agreement by the Treasury with the Central Bank of Iceland to purchase collateralised loans and security claims totalling some ISK 134bn, together with lower costs of refinancing the banks. The Treasury position improved by ISK 42bn in 2009, with Treasury cash and cash equivalents of ISK 227bn at year-end 2009.

2009 Treasury Financial Statements

The 2009 financial statements are presented in two parts. The first consists of consolidated financial statements for Type A government operations. The second consists of the accounts of individual Type A institutions, Type B government corporations, Type C credit institutions, Type D financial undertakings, and Type E limited companies or partnerships in which the state holds at least a 50% stake. The 2009 Treasury financial statements will be accessible on the website of the Financial Management Agency, , where further information is available.

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