The Central Bank of Iceland has decided to take advantage of loan channels from Norway and Denmark worth EUR 400 million (USD 546 million) on the basis of currency swap agreements reached between the Nordic countries in May this year.
The agreements were made with the central banks of Norway, Sweden and Denmark and granted EUR 500 million (USD 683 million) from each bank in exchange for Icelandic krónur, Fréttabladid reports.
The foreign currency will be used to facilitate trade overseas. “It is supposed to secure trade for essentials like medicine, oil and, if need be, food products,” said Minister of Industry Össur Skarphédinsson, adding however that the amount may not prove sufficient.
“I fear that this will not have a decisive impact on the situation. The most serious problem that we are facing is the situation of currency markets and I believe that either people have to make a decision on seeking assistance from the International Monetary Fund or obtain a much higher amount of foreign currency elsewhere,” Skarphédinsson said.
Pétur Blöndal, chairman of the Althingi parliament’s committee on trade and economics, said activating the currency swap agreements will have a positive influence for the economy and a good impact on the trade balance.
Ólafur Ísleifsson, a professor of economics at Reykjavík University, said however that these measures demonstrate how the lack of foreign currency in Iceland has reached a critical stage, explaining that the currency swap agreements were originally intended for increasing Iceland’s foreign currency reserves but not for foreign trade.
Click here to read more about the currency swap agreements.