Treasury finances in August 2002. Report date: September 19, 2002


Treasury Finances in August
Report date September 19, 2002

Figures for Treasury finances for the first eight months of 2002 are now available. They are on a cash basis and therefore not comparable to the Treasury accounts or the fiscal budget, both of which are presented on an accruals basis.

The cash deficit from operations amounted to 16.3 billion kronur, compared to a deficit of 6.9 billion kronur at the end of August 2001. This difference is mainly due to the 9.4 billion kronur increase in expenditure in excess of revenue. Financial transactions were in surplus by 7.1 billion kronur whereas August 2001 reported a deficit of 1.3 billion kronur. The main difference comes through the sales of shares in the National Bank of Iceland of 4.8 billion kronur. Further, incoming repayments of outstanding claims increased by 3 billion kronur compared to August last year.

Total revenue amounted to 152S billion kronur, an increase of about 9.7 billion kronur from last year or 7 per cent. Tax revenue increased somewhat less, by 6 billion kronur, or 4 per cent. This difference stems entirely from increased revenue through sales of assets. In comparison, prices increased by 6S per cent during this period, and the wage index rose by 8 per cent. Tax revenue for the first eight months indicate a continuing contraction in the economy, although this contraction is decreasing rapidly. Most main revenue items such as the value added tax, social security taxes and the income tax have increased in real terms in recent months, strongly indicating an end to the downturn that began in the early months of 2001.

Total expenditures amounted to 165.8 billion kronur, increasing by close to 16 billion kronur from last year or 10.6 per cent. Social affairs expenditure amount to 101.7 billion kronur, measuring approximately 60 per cent of total Treasury expenditure. The most significant part is health care expenditure of 40.7 billion kronur with a 5 billion kronur increase from August 2001. Equally, social security expenditure measures 33 billion kronur, an increase from last year by 3.2 billion. Furthermore, expenditure on economic affairs is 24 billion kronur which is similar to the results of August 2001. Interest payments increase by 0.8 billion kronur, or 5 per cent from August 2001.

Foreign long-term borrowing amounted to 32.2 billion kronur in the first eight months. The Treasury remitted 6 billion kronur to the Government Employees Pension Fund in order to lower future liabilities of the Treasury. Domestic borrowing amounted to 9.3 billion kronur. Loan repayments to the amount of 22.1 billion kronur weigh against this, where 12 billion went to repayments of foreign long-term debt. The overall cash balance was negative by 5.2 billion kronur, compared with a 4.1 billion kronur deficit in 2001.