Debt ratio falls with municipalities in Gaum´s monitoring area

16.10.2019

Debt ratio falls with municipalities in Gaum´s monitoring area

In October each year, the Association of Icelandic Local Autorities publishes key figures on local government finances. It states that the debt ratio of Part A and Part B fell in oall municipalities in Gaum´s monitoring area between 2017 and 2018. 

The debt-to-equity ratio of Part A and B decreased by 157% to 148% at the Norðurþing, 51% to 48% at the Þingeyjarsveit, 47% to 37% at Skútustaðahreppur and at Tjörneshreppur the debt ratio fell from 16% to 10%.

The Icelandic Local government law (Sveitarstjórnarlög nr. 138/2011) deals with the finances of municipalities. It states in Article 60 that the total liabilities and liabilities of Sections A and B in financial statements should not exceed 150% of regular income. The debt ratio is actually a measure of how vulnerable municipalities are to income contraction or increase expenditure, the higher the debt ratio is, the more vulnerable the municipalities finances are to income contraction or increse in expenditure.

In 2018, all of the municipalities in the Gaumurs monitoring area have fallen below this criterion and, as the figures reported above, the debt ratio has decreased somewhat in all municipalities.