2021 finance bill predicts large deficit

01.10.2020 - 12:29
Mynd með færslu
Fjármálaráðherra með fjárlagafrumvarpið Mynd: Höskuldur Kári Schram - RÚV
Iceland’s finance minister has submitted his draft budget bill for 2021, as is traditional at the start of the autumn sitting of Alþingi. The finance bill is usually voted into law right before the Christmas break. This year, the bill foresees a 264 billion króna budget deficit next year.

The finance ministry budgets for income in 2021 of 772 billion krónur and expenditure of around 1,000 billion. The vast majority of that shortfall (192 billion krónur) is attributed directly to the coronavirus pandemic. “State finances will continue to be applied full force to protect jobs and to create resilience,” the ministry’s website says.

The biggest single factor in the predicted deficit is lower tax receipts for the treasury—estimated at 89 billion krónur. 

The combined deficit in 2020 and 2021 could be as high as 600 billion krónur, according to the ministry; which plans to halt the accumulation of national debt after five years. 

The budget anticipates an extra 23 billion krónur for unemployment benefits and 35 billion for stimulus investments, such as new infrastructure and increased funding for research and innovation. 

15 billion króna will be set aside next year for healthcare—including seven billion for the ongoing construction of the new Landspítali national university hospital, which will cost 12 billion overall by the time of completion. 

Tax cuts for low earners will deprive the State of 34 billion krónur next year, but it is planned for the lowest earners to benefit by some 120,000 krónur a year, each. A new, higher personal discount figure (the amount of everybody's pay that is tax-free) will also inject two billion krónur extra into people’s pockets, the ministry says. 

Finance minister Bjarni Benediktsson told RÚV the State is in a good position to be able to take on large debts this year and next year, and that he believes it is important to do so in order to invest now for the future. The hard part, he says, is coming out of the “vicious cycle of deficit and debt” and that investing in innovation and infrastructure now is the best way to make that happen in the coming years. 

The budget bill explicitly mentions the coronavirus an impressive 99 times.

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Alexander Elliott
Project manager
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