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The 2004 Fiscal Budget

The 2004 Fiscal Budget. 1 October 2003. Highlights. Treasury revenue balance for 2004 estimated to be ISK 6.4 billion or ¾ % of GDP. Net Treasury financing balance for 2004 estimated to be ISK 13 . 7 billion. Public Finances 2002-2004. Revenue surplus excluding irregular items.

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The 2004 Fiscal Budget

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  1. The 2004 Fiscal Budget 1 October 2003

  2. Highlights Treasury revenue balance for 2004 estimated to be ISK6.4 billionor¾% of GDP Net Treasury financing balance for 2004 estimated to be ISK13.7 billion

  3. Public Finances 2002-2004

  4. Revenue surplus excluding irregular items

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

  6. Medium-term Public Finance Programme 2005-2007 • Treasury surplus of at least 1¾% of GDP in 2005 and 1% in 2006 • National public works cut by ISK 5 billion over the next two years, then increased by the same amount 2007-2008 • Growth of public consumption slowed • Annual growth max. 2% in real terms

  7. Medium-term Public Finance Programme 2005-2007 • Moderate growth in transfer payments • Annual rise in transfer expenditure no more than 2½% in real terms • Tax cuts of approx. ISK 20 billion2005-2007 • Neither the Norðurál enlargement nor income from sale of assets are included in budget premises

  8. Medium-term Public FinanceProgramme 2005-2007

  9. Economic assumptions

  10. New period of growth

  11. Price levels remain steady %

  12. Purchasing power grows

  13. Low level of unemployment

  14. Temporary rise in current account deficit

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

  16. Budget facts and figures

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

  18. Treasury tax revenue almost unchanged

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

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

  21. What has been accomplished?

  22. Treasury debt

  23. Reduced interest expenditure

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

  25. In summary • Public finances applied to counter inflationary effects of heavy industrial projects • Debt and debt service burden reduced • Opening up possibilities for tax cuts 2005-2007 • Ensuring stability

  26. The Budget itself and accompanying documentation is available on the Ministry’s website:www.ministryoffinance.is

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