Statistical bulletin - 01.03.1960, Qupperneq 2

2
No. 3
Economic stabilization program.
When the present Icelandic Government took office in November 1959, it
announced its intention to carry out a comprchensive program of economic stabil-
ization. This program was subsequently presented to the Althing in a number
of bills. The first of these was a Bill on Economic Affairs which was promulagted
as law on February 20 (Act No. 4/1960). Other laws wliich have been passed by
the Althing include a sales tax law, a new income tax law, a law on a municipal
equalization fund and an amendment to the Social Security Act. Presently (April
1960) the Althing is considering a bill on municipal taxes, a bill on the organ-
ization of the import trade and foreign exchange transactions and a bill on the
price control.
The principal measures of the economic stabilization program are the foll-
owing:
1. The system of assistance to exports which has been in force since 1951
has been abolished and a unified rate of exchange adopted. The new rate is kr.
38.00 to one U.S. dollar.
2. Strong measures have been taken to limit expansion of bank credit. Auto-
matic rediscounting of bills by the Central Bank has been curtailed and rates
of interest on loans and deposits raised.
3. Compcnsation on wages and salaries according to index is no longer per-
mitted, while organizations of wage-earners and employers are left free to nego-
tiate changes in basic wages.
4. In order to reduce the effects of the economic measures on the standard
of living, especially of families with many children and of old people, social securi-
ty payments have been greatly increased, espccially family allowances and old
age and invahd pensions.
5. The income tax has been abolished on ordinary personal income (Kr.
70.000 or less for a childless couple) and decreased for higher income.
6. The 9% tax on manufactured goods and on services has been abolished and
a general sales tax of 3% introduced on the retail level. The municipalities will
receive 1 /5 of this tax in order to enable them to reduce municipal taxes. The import
levy and some other special taxes wliich previously accrued to the Export Fund
have been transferred to the Treasury. In order to ensure a balanced budget in
1960, the sales tax on imports has temporarily been increased from 7% to 15%
for the remaining part of the year.
7. An extensive liberalization of imports is being prepared. It is expected
that there will be no restrictions on about 60% of imports. The remaining 40%
will be subject to licence. These are, however, expected to be granted freely as
regards imports from countries with which Iceland has bilateral agreements.
Licenced imports under global quotas from the free-currency area is expected
to amount to 10—15% of total imports.
8. In order to help carrying out the stabilization program and particularily
the liberalization, Iceland has obtained additional foreign exchange resources
from the OEEC and the IMF. The European Fund has granted a credit of $12
million. At the same time Iceland’s quota in the International Monetary Fund
has been increased from $1,5 milHon to $11,25 million, and a stand-by agree-
ment has been concluded with the Fund for an amount of 50% of the quota.
New foreign exchange rates.
As stated in the article ,,Economic stabilization program” in this same issue
of the Statistical Bulletin, the Icelandic króna has been devalued according to
provisions in Act No. 4 20. February 1960, on Economic Affairs. The new par
value is kr. 38,00 to one U.S. dollar. The previous par value, according to Act
No. 22 19. March 1950, was kr. 16,2857 to one U.S. dollar.