From deficit to surplus: Iceland moves to end years of budget shortfalls

Iceland's proposed 2027 budget aims to turn years of state deficits into a surplus of 5 billion krona. The result would be positive for the first time in nearly a decade, according to a Finance and Economic Affairs Ministry announcement.

The proposal says state revenues and spending will come into balance. Finance and Economic Affairs Minister Daði Már Kristófersson said the government had operated with a deficit for eight consecutive years and had now turned the minus into a plus.

He attributed the shift to restraining spending growth, improving state operations and directing funds toward welfare and basic services. He also said a balanced budget would help reduce inflation and the burden of interest payments while supporting essential public services in the future.

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The state treasury has been run with a deficit for eight consecutive years. Now we have turned that minus into a plus and put public finances on a firmer footing.

The bill is due to be presented to Iceland's parliament when it opens the session the following day. The government says it will pursue 44.2 billion krona in efficiency measures through general restraint, reductions in state positions, more economical public procurement and a simpler administration, including the merger of state agencies.

The ministry said health and elder-care institutions, schools, courts and law enforcement would face less pressure to cut spending in order to protect daily public services. At the same time, the budget would devote 28.8 billion krona to new and urgent priorities. These include nursing places, stronger health institutions, shorter waiting lists, greater support for children with complex needs, higher pensioners' general tax-free allowances, improved unemployment benefits, stronger universities, more funding for learning materials and STEM, and increased investment in roads, rural public transport, policing, defense, prisons and secure accommodation.

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A balanced budget is not an objective in itself, but a prerequisite for reducing inflation and the burden of interest payments and ensuring that the state can provide important services in the future.