Icelandic government spent nearly $2.4 billion on disasters in past decade

Iceland’s government has spent almost 338 billion krónur ($2.4 billion) over the past decade responding to economic shocks and natural disasters, according to figures presented in the Icelandic parliament Alþingi.

The COVID-19 pandemic remains the single largest expense—194.4 billion ISK ($1.4 billion) in state support during 2020–2021. The ongoing seismic and volcanic unrest in the town of Grindavík has so far added another 82.3 billion ISK ($588 million). Other substantial expenditures include 18.7 billion ISK ($134 million) tied to the government’s response to the Russia-Ukraine war (2022–2025), 22.6 billion ISK ($161 million) on natural incidents like storms, floods, avalanches and landslides, 16.6 billion ISK ($118 million) following the WOW air bankruptcy and 3.3 billion ISK ($24 million) related to cod collapse and other fishery crises.

To put these figures in context, Iceland’s total government expenditure in 2024 was 2,135 billion ISK ($15.3 billion), according to Statistics Iceland. This means the accumulated shock-related spending over the past decade equates to around 16% of a year’s total government expenditure.

The figures, provided in response to a parliamentary question by MP Njáll Trausti Friðbertsson, represent only direct state spending and do not include indirect economic impacts, such as lost revenues or private-sector ripple effects. The government also stressed the complexity of attributing costs precisely, especially in areas like unemployment benefits where payments are eligibility-based rather than tied to specific events.