Iceland’s government debt expected to rise by 196 billion krona

Iceland’s government debt is expected to increase by 196 billion krona in 2026, equivalent to a 0.6 percentage-point rise in the debt ratio relative to gross domestic product.

The budget proposal estimates government debt at 2,456,341 million krona in 2026 and 2,645,712 million krona in 2027. The government says the increase reflects higher inflation and new borrowing that was not included in the budget.

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Most analysts and international institutions forecast that the debt ratio will continue to fall in Iceland in the coming years.

The government’s website also notes that Iceland’s public debt ratio has fallen over the past five years. Iceland’s debt is currently in the lower half among European countries, it says.

Most analysts and international institutions expect Iceland’s debt ratio to continue falling in the coming years, according to the government. It says reducing debt is particularly important because public-sector interest costs are among the highest in Europe.

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It is particularly important for Iceland that debt falls because public-sector interest costs are among the highest in Europe.