The 2004 Fiscal Budget 1 October 2003

Treasury revenue balance for 2004 estimated to be ISK 6.4 billion or ¾% of GDP Highlights Net Treasury financing balance for 2004 estimated to be ISK 13.7 billion

Public Finances

Revenue surplus excluding irregular items

Treasury balance shows a year-on-year improvement of ISK 13 billion, reflecting greatly increased restraint in public finances

Medium-term Public Finance Programme National public works cut by ISK 5 billion over the next two years, then increased by the same amount Treasury surplus of at least 1¾% of GDP in 2005 and 1% in 2006 Growth of public consumption slowed ­Annual growth max. 2% in real terms

Moderate growth in transfer payments ­Annual rise in transfer expenditure no more than 2½% in real terms Tax cuts of approx. ISK 20 billion Medium-term Public Finance Programme Neither the Norðurál enlargement nor income from sale of assets are included in budget premises

Medium-term Public Finance Programme

Economic assumptions

New period of growth

Price levels remain steady %

Purchasing power grows

Low level of unemployment

Temporary rise in current account deficit

Main assumptions for 2004 Economic growth 3½% Purchasing power increase 2½% Price level rise 2½% Unemployment 2½% Current account deficit 3¼% of GDP ISK Index 125

Budget facts and figures

Treasury expenditure drops in real terms* * Excl. irregular items

Treasury tax revenue almost unchanged

Priority areas Allocations to seniors pensions increase by 17% Increased allocations to education, esp. to universities, upper secondary schools, research and Students Loan Fund Health care allocations increase by 8% Restructuring of research with expansion of research and technology funds

Special measures concerning income and expenditure ISK 1500 million reduction in transfer payments Operating expenditure reduced by ISK 700 million New investment reduced by ISK 1500 million Additional revenue of approx. ISK 1000 million

What has been accomplished?

Treasury debt

Reduced interest expenditure

Additional contribution to Civil Servants Pension Fund, with interest Imputed 5% interest 2003 and 2004

In summary Debt and debt service burden reduced Public finances applied to counter inflationary effects of heavy industrial projects Opening up possibilities for tax cuts Ensuring stability

The Budget itself and accompanying documentation is available on the Ministrys website: