Treasury finances in January 2001. Report date: February 21, 2001

Figures for Treasury finances in January 2001 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.

Summary

Cash from operations amounted to 1.8 billion krónur, about 700 million more than had been projected. The result is, however, about 3 billion lower than last year which is largely due to leads and lags which are expected to be evened out in the coming months. The net financial balance amounted to just over 100 million krónur, compared to a 9.5 billion krónur surplus in January a year ago. Still, the balance this year exceeds projections by about 900 million. The large surplus last year is primarily due incoming payments of 5.5 billion krónur due to the inpayment of proceeds from the sale of shares in the government-owned commercial banks that took place late in 1999 with payment being carried over into early 2000. New borrowing amounted to 3.4 billion with repayments of 0.5 billion in addition to a payment of 1,250 million krónur to the Government Employees Pension Fund in order to reduce future pension commitments. The overall surplus amounted to 1.8 billion krónur, compared to 11.8 billion in January of last year.

Treasury finances in January

(Millions of krónur, cash basis)

	1998	1999	2000	2001
Revenue...............................…………...............	10,229	13,737	17,398	17,579
Expenditure......................…………..................	10,969	11,225	12,651	15,748
Cash from operations...........................	-740	2,512	4,747	1,831
Financial transactions......................................	960	-1,699	4,239	-1,693
Net financial balance……................................	220	813	8,985	138
Debt redemption................................................	-425	-502	-158	-447
Domestic….......................................................	-425	-188	-158	-447
Foreign..............................................................	0	-314	0	0
Pension fund prepayments………....................	-	-	-500	-1,250
Gross borrowing requirement.…....................	-205	311	8,828	-1,559
New borrowing...................................................	1,503	-2,063	3,030	3,369
Domestic….......................................................	1,503	-2,088	2,984	3,370
Foreign..............................................................	0	25	46	-1
Overall cash balance………..............................	1,298	-1,752	11,858	1,810

Total revenue of the Treasury amounted to 17S billion krónur in January 2001, about S billion less than the monthly projection indicated. The increase in total revenue from January of the previous year amounts to close to 200 million or 1 per cent and tax revenue declined by a similar percentage. The main reason for the scant increase is that revenue collection appears to have been shifted between January and February. The main change from the previous year is that corporate tax revenue nearly doubles which is explained by a lag in revenue collection towards the end of last year, since outstanding corporate tax revenue amounted to about 2 billion krónur at the end of the year. Revenue from the personal income tax increased by a marginal 3 per cent and the capital income tax by 10 per cent. The social security tax remains nearly unchanged from a year earlier.

Revenue from indirect taxes declined by 900 million krónur from January of last year. This is in part due to lower car imports and reduced revenue therefrom and partly to a drop in revenue from motor vehicle levies and excise taxes on liquor and tobacco by some 600 million krónur. This appears to reflect a shift in proceeds between months rather than a discernible trend.

Revenue from the value added tax also declines, partly due to a rise in tax refunds by close to 300 million krónur from January a year ago. VAT revenue from imports rose however by 200 million or 5 per cent.

Treasury revenue in January

(Millions of krónur, cash basis)

					Increase	in	%
	1998	1999	2000	2001	1999	2000	2001
Total tax revenue...............................	9,787	13,177	16,767	16,638	34.6	27.2	-0.8
Taxes on income and profit..............	5,650	5,427	8,086	8,830	-3.9	49.0	9.2
Personal income tax…......................	3,406	3,895	4,429	4,575	14.4	13.7	3.3
Corporate income tax.......................	240	156	262	510	-35.0	67.9	94.7
Other taxes on income and profit…	2,004	1,376	3,395	3,745	-31.3	146.7	10.3
Social security taxes..........................	1,468	1,655	1,811	1,805	12.7	9.4	-0.3
Net wealth taxes................................	419	390	538	601	-6.9	37.9	11.7
Taxes on goods and services............	2,230	5,688	6,312	5,375	155.1	11.0	-14.8
Value added tax ............................	375	3,025	3,208	3,152	706.7	6.0	-1.7
Other indirect taxes.........................	1,854	2,663	3,101	2,224	43.6	16.4	-28.3
Of which:
Excise tax on motor vehicles…..	163	395	370	248	142.3	-6.3	-33.0
Excise tax on petrol……………	596	552	569	550	-7.4	3.1	-3.3
Diesel weight tax………………	308	427	485	259	38.6	13.6	-46.6
Tobacco and liquor taxes……..	336	487	738	391	44.9	51.5	-47.0
Other indirect taxes..................	451	802	939	776	77.8	17.1	-17.4
Other taxes........................................	20	17	20	27	-15.0	17.6	35.0
Other revenue...................................	441	561	631	940	27.2	12.5	49.0
Total revenue....................................	10,229	13,737	17,398	17,579	34.3	26.7	1.0

Expenditure

Figures for expenditure have been revised from their presentation in earlier monthly statements. They have not been revised backwards to 1998 and the expenditure table below does therefore not cover the same time period as the two tables above.

Total cash expenditure amounted to 15.8 billion krónur in January, an increase of 3.1 billion from January 2000, yet below projections for the month by 1.1 billion. This large deviation must be ascribed to the brief period of one month, where differences between projection and outcome tend to be quite large.

Treasury expenditure in January

(Millions of krónur, cash basis)

				Increase	in %
	1999	2000	2001	2000	2001
Administration....................................	967	1,577	1,458	63.1	-8.2
General administration.......................	-	1,019	965	-	-5.3
Justice and law enforcement…..........	-	558	494	-	-11.5
Social affairs.......................................	7,195	7,099	8,608	-1.3	21.3
Of which: Education and culture.........	-	1,631	2,404	-	47.4
Health........................................	-	2,986	3,315	-	11.0
Social security............................	-	2,161	2,513	-	16.3
Economic affairs..................................	1,648	1,838	2,879	11.5	56.6
Of which: Agriculture.. ........................	-	761	1,410	-	2.7
Communications........................	-	694	735	-	8.5
Interest expenditure...........................	768	1,391	1,755	81.1	26.2
Other expenditure..............................	646	746	1,047	15.5	40.3
Total expenditure...............................	11,225	12,651	15,748	12.7	24.5

Administrative expenditures, covering the central administration of the government, the courts and law enforcement, declined by 7.5 per cent between the two years, largely due to lower outlays by the Althingi and to special non-recurrent projects under the auspices of the Prime Minister's Office. Furthermore, the retroactive pay increase of the police which was paid out in January of last year is not reflected in this year's figures.

About half of total went to various social expenditures, such as education, culture, health and social security. Such outlays rose by 20 per cent from a year ago which is largely due to a 60 per cent increase in education expenditures, mostly due to a shift in payments between months. The same applies to health and social security expenditures, increasing by 11 and 16 per cent respectively. Unemployment compensation declines due to lower unemployment; it was 1.6 per cent in January of this year as against 1.8 per cent a year earlier.

Expenditure on economic affairs rose by 1 billion krónur or more than 50 per cent, altogether due to a 740 million krónur payment in adjustment assistance to farmers surrendering their production quotas.

Interest expenditures increase by 26 per cent, or close to 400 million krónur, all of which is due to an early redemption of government bonds in January.

Other expenditures increase by 300 million krónur due to increasing outlays to the Municipal Equalisation Fund.

Capital transactions

The financial transactions account registered net out-payments of 1.7 billion krónur in January as against an inflow of 4.7 billion in January of 2000. The difference is wholly due to the 5.4 billion krónur in-payment for the sale of shares in January 2000 noted earlier.

Debt redemption amounted to close to 400 million krónur, almost 300 million more than last year. In January, tender offers for 500 million krónur in bond issue RIKS 02 0401 were accepted, of which 350 million krónur represented principal and 150 million interest. Such redemption before maturity is directed at bond issues that trade thinly in the secondary market.

In accordance with the fiscal budget, a part of this year's financial surplus will be used to prepay some of the Treasury's future commitments to the Government Employees Pension Fund. Such payments amounted to 1,250 million krónur in January of this year, compared with 500 million krónur last year.

New Treasury borrowing amounted to 3.4 billion krónur, a slightly higher amount than last year. Almost all new borrowing took place through the sale of Treasury bills.