The results of the Government accounts for 2017 have now been published and the accounts sent to Parliament. The accounts show a surplus of ISK 39bn, showing Iceland’s strong fiscal position. Revenues totalled ISK 783bn and operating expenditures ISK 711bn. Net financial expense was negative in the amount of ISK 74bn, and the share in earnings of Government-owned companies was positive by ISK 40bn.
“In the past several years, Iceland’s economy has grown apace, and Government operations have improved markedly. Now, however, there are signs that the cycle has peaked and that the economy is moving towards a new equilibrium after wide fluctuations in recent years. The Treasury is strong, and the fiscal situation has improved due to systematic deleveraging and robust GDP growth. In spite of this strong position, it is important to remain steadfast and cautious in fiscal management. Government expenditures have risen somewhat in recent years, in line with improvements in the Treasury position, but it is clear that spending growth cannot continue indefinitely at the pace of the past few years,” said Bjarni Benediktsson, Minister of Finance and Economic Affairs, about the outcome of the Government accounts.
First publication pursuant to the Act on Public Sector Finances
The Government accounts for 2017 are the first to be published in accordance with provisions in the Act on Public Sector Finances. New financial reporting methods are being introduced according to a special three-year timetable, under which the 2019 Government accounts will be fully compliant with international financial reporting standards for public entities.
The Government accounts include an initial balance sheet from the beginning of 2017, which includes major changes in presentation and content from the 2016 accounts. The treatment of tangible operational assets has changed in that they are capitalised and written off in accordance with their useful economic life instead of being charged upon acquisition. The Treasury’s holdings in companies are assessed using the equity method; i.e., the State capitalises its share in their equity. Obligations that the Treasury has undertaken and must meet in the future, such as those due to accrued wage-related rights, are entered to the balance sheet. With these changes, the Treasury balance sheet gives a clearer overview of Treasury assets and liabilities. Total assets as of end-2017 were ISK 2,137bn, while liabilities totalled ISK 1,639bn and equity ISK 498bn.
It should be noted that the outcome of the Government accounts is published in accordance with the international public sector accounting standards (IPSAS), whereas the overall outcome in the fiscal plan and the fiscal budget are published according to the Government finance statistics (GFS) standards. Both methods are intended to ensure consistency and international comparability. The Treasury outcome according to the Government accounts is therefore not comparable to the performance targets laid down in the fiscal plan and the fiscal budget. According to preliminary figures from Statistics Iceland, the overall 2017 outcome according to the GFS was positive by ISK 31bn, which is an improvement of ISK 6bn over and above the assumptions in the fiscal budget, a clear sign of the Treasury’s strong position.
“It is vital that the fiscal strategy be characterised by prudence and steadfastness, and there is much to be gained in doing what we can to strengthen social and economic stability. In this context, it is worth mentioning the review of the monetary policy framework and the work we are doing to prepare for the future, with refinancing and retirement of debt,” said the Minister of Finance and Economic Affairs.
“We must continue to ensure responsible handling of Government finances, as this creates the scope for improvements and reforms in services for the public, as well as strengthening the economy and improving Icelanders’ living standards,” the Minister continued.
Ratified by electronic signature
The Minister of Finance and Economic Affairs, the State Accountant, and the Auditor General ratified the Government accounts by electronic signature. The entire accounts, with the associated itemisations and explanatory notes, can be found on the Financial Management Authority website: fjs.is.