Deficit has become surplus - 2007 Annual Budget
Economic stagnation has turned into economic progress. As a consequence, the Government can now propose a budget with a surplus. “The economic policy, which focused on minimizing fluctuations in the economy, has succeeded and the Faroese people believe in the future”, says the Minister of Finance, Mr Bárður Nielsen.
Proposed Bill for the 2007 Annual Budget
Deficit has become surplus
Economic stagnation has turned into economic progress. As a consequence, the Government can now propose a budget with a surplus. The 2007 budget is expected to have a 74.5 million DKK surplus, but current growth is so strong that a surplus by the end of the year is highly likely. The economic policy has succeeded and thus the Government will move from an employment-generating policy to a policy that will ensure that the economy does not overheat. The goal now is to ensure continuous growth while dampening any tendency toward overheating within the Faroese economy.
“The economic policy, which focused on minimizing fluctuations in the economy, has succeeded and the Faroese people believe in the future”.
So stated the Minister of Finance, Mr Bárður Nielsen, upon presenting the proposed annual budget for 2007 before Parliament. This is the first budget in three years that has a budget surplus. The surplus for 2007 is estimated to 74.5 million DKK.
Surplus expected even in this budget year
“Stagnation has turned into growth, and the best proof of this is that this year already it is likely that the national accounts will show a surplus. The goal is now to preserve this growth by carrying out a policy that will ensure that the economy will not become overheated”, says Mr Bárður Nielsen, Minister of Finance.
It is extremely important that any growth in public expenditures remains at an appropriate level, and that, e.g., wage increases be limited.
Business activity is great and there is a need for more labour, especially in the construction industry.
“The public sector must not increase its demand too much and consequently over-stimulate the economy. Therefore, we are changing the course of the economic policy somewhat. From an employment-generating policy, we are shifting to a policy that focuses on ensuring that the economy does not overheat”, says the Minister of Finance.
In 2007, tax relief of 60 million DKK will be provided, which shall encourage fuller employment, and that the economy will continue to develop and grow on a healthy foundation.
Family stability highest priority
In short, families, education, the elderly and domestic transport will receive the highest priority in the proposed annual budget for 2007. Care for the elderly will be strengthened. It should be possible for all who wish to gain a high school education. The elementary school system shall receive a comprehensive appropriation that will ensure that the quality of teaching can improve, and the tax deduction for children will become a child subsidy.
Hope for continuous growth
The Minister of Finance has faith that the economic growth now apparent will continue.
“Political stability generates trust, and, along with a sensible economic policy, encourages boldness and a faith in the future. Industry today is demonstrating initiative and a willingness to embark on other business endeavours and enter new markets. There is a dynamism that seldom has been greater than today. This gives hope that we will see many new business ideas sprouting in the future. This emerging dynamism also augers well for continuous economic growth”, notes Minister Nielsen.
Statistics in brief
In brief, the surplus (net CIL) of the 2007 annual budget amounts to 74.5 million DKK. Revenue is estimated to be 4.1 billion DKK. Of this, tax revenue is 1.7 billion DKK. Fees, customs duties, etc. amount to 1.6 billion DKK. Total grant funding from the Danish Treasury is 635 million DKK.
Operational expenses, investment and loan expenses (net) are estimated to be 4.0 billion DKK. Of these, operational expenses are 3.7 billion DKK, investment expense is 261 million DKK, and interest expense is 22 million DKK.
Argir, 29 September 2006
Ministry of Finance
The Ministry of Finance will respond to factual questions regarding the 2007 budget. Comments can be obtained from Mr Bárður Nielsen, Minister of Finance, by calling the Ministry at +298-352020.