Ministry of finance Government debt is projected to drop to below 25% of GDP by 2022, thanks to healthy budget surpluses. Photo/Iceland Mag.
Yesterday the newly formed Left-Green led coalition government revealed its first budget bill. The government intends to increase spending on health care, education and infrastructure investment. Despite this the budget for the fiscal year 2018 envisions that after interest payments the budget will have a significant surplus of 3.5% of GDP. The budget has to be approved by parliament before the end of the year.
At the same time as the budget for 2018 was revealed the Ministry of Finance unveiled the long term budget plan for 2018-22. The plan lays out the broad outlines of the fiscal policy of the government. According to this the budget will continue to have a large budget surplus, allowing the government to pay down debt. By the end of 2020 government debt will have dropped below 30% of GDP, and by 2022 government debt should not exceed 25% of GDP.