The Icelandic Treasury received ISK 66.7 billion in cash yesterday for the sale of Iceland Telco. The ministers of the government convened and decided how the proceeds would be disposed of, their decision will be introduced as a bill in Althingi this fall. It is the highest one time payment that the treasury has ever received reported the Icelandic National Broadcasting Service, RÚV.
ISK 34.5 billion were paid in Icelandic króna and ISK 32.2 billion in foreign exchange.
The foreign exchange will immediately be used to pay back foreign loans; on the whole however the long term objective is to use ISK 24 billion to pay down debts. The remaining ISK 43 billion will be used for various projects.
ISK 15 billion will be used for transportation infrastructure projects. ISK 18 billion will go to toward building a “high tech hospital”. According to RÚV that amount is enough to build an emergency unit. It is expected that construction of the hospital will begin in 2008. The coast guard is to receive ISK 3 billion to purchase or rent a vessel and an airplane. ISK 2.5 billion will go to the Icelandic New Business Venture Fund. A communication fund will receive ISK 2.5 billion to build up a the GSM system in rural areas. ISK one billion will go to housing for the mentally ill and another ISK one billion to a new building for the Árni Magnússon Institute, an academic research institution that houses manuscripts and documents.
The expenditures will begin in 2007 and last until 2012. The government believes that by waiting until 2007 they are taking into account the current state of expansion of the Icelandic economy. Interest expenses will decrease and interest on the amount that the Icelandic Central Bank will hold is ISK 4 billion per year.
David Oddsson, foreign minister, said that he expects the treasury to run a ISK 25 billion surplus this year. He said that this year ISK 50 – 60 billion will go toward paying loans. Foreign loans to the government amounted to ISK 160 billion at the end of 2004 and will be ISK 100 – 110 billion by the end of this year.