Icelandic government signs updated transportation agreement increasing costs to 310 billion ISK

The Icelandic government has signed an updated transportation agreement that significantly increases the overall cost from 160 billion ISK to 310 billion ISK. The agreement commits the state to finance one-third of public transport operational costs in collaboration with local municipalities.

As part of the plan, 2.8 kilometers of underground tunnels will be constructed under Miklabraut. Einar Þorsteinsson, the Mayor of Reykjavik, emphasized the need for a unified transport policy for the rapidly growing capital region, stating, “We must not be fighting over individual projects… We are confirming a common strategy today.”

The updated agreement will be funded through direct contributions, additional grants, fees, and loans. The state is set to contribute 2.8 billion ISK annually from 2024 to 2040, along with an extra 4 billion ISK per year from 2025 to 2029. Municipalities will contribute 1.4 billion ISK per year over the same period.

To bridge funding gaps, fast-track and traffic fees will be defined and collected to achieve the goals of the pact. Bjarni Benediktsson, the Prime Minister, remarked that planning has become more precise compared to when the original agreement was signed in 2019, backed by better data and calculations.

The updated agreement involves an investment of 14 billion ISK per year until 2040, with 42% dedicated to main road projects, another 42% for the capital region’s bus rapid transit system, 13% for pedestrian and cycling paths, and 3% for traffic management. The expected social benefit from this transportation agreement is estimated at 1,140 billion ISK.