Varða calls for transparency, disclosure and funding for critical tasks in its submission on the 2027 budget

Iceland's spending on security and defence will rise by tens of billions of krónur in the coming years. An increase on that scale calls for a clear picture of where the money goes. That is why, on 7 October, Varða sent Althingi's Budget Committee a submission on the budget bill for 2027, with seven proposals.

Iceland has committed to spending 1.5% of GDP on defence-related purposes by 2035, about ISK 77 billion a year. It is still unclear, however, which expenditure counts towards that target. Figures the ministries have submitted to the Budget Committee range from ISK 10 to 49 billion. With a range that wide, it is hard to judge whether Iceland is on track.

Transparency and disclosure are a prerequisite

Three of the proposals therefore concern transparency and disclosure. Varða proposes that, before the second reading, it be set out which appropriations in the bill count as security and defence spending and on what basis. The budget should also be accompanied each year by an overview of public-sector security and defence spending, as is the practice in the other Nordic countries, and a costed long-term plan should be in place when the next fiscal plan is prepared.

In our view, that plan should rest on a published risk assessment. Unlike its Nordic neighbours, Iceland has not published a dedicated public threat assessment.

Four tasks that cannot wait

The other four proposals concern tasks Varða has examined over the past year and believes need funding now:

• Security stocks. Accessible fuel stocks at year-end have covered about 20–50 days of demand, against a 90-day benchmark.
• Merchant ships under the Icelandic flag. Not a single merchant ship is registered in Iceland. We propose cooperation with the Faroe Islands on operating an Icelandic international ship register.
• The police Special Unit. Armed call-outs rose from 56 in 2014 to 424 in 2025, while the Unit has ten fewer officers than authorised.
• Responding to drones. Neither the bill nor the fiscal plan mentions police response to drones at airports, ports and other critical infrastructure.

Higher spending on security and defence is an opportunity to strengthen Iceland's resilience, but only if it is clear where the money goes. That is why we put transparency first, alongside the tasks that cannot wait.

The submission was written by Dr Ragnar Hjálmarsson and Kristinn Árni L. Hróbjartsson and is published in full on our website.

Submission · October 2026Submission on the 2027 budget billSeven proposals to Althingi's Budget Committee on security and defence appropriationsRead →