Iceland Owes 5,150 Billion ISK Skip to content

Iceland Owes 5,150 Billion ISK

The Central Bank of Iceland estimates that the debt of Iceland will be 5,150 billion ISK at the end of 2010 which is 320 percent of the gross domestic product. This is slightly more debt than estimated in the last reevaluation by the IMF which valued the debt at 295 percent of GDP, Morgunbladid reports.

The Central Bank says that this evaluation is a subject of great uncertainty and will be reviewed constantly. The evaluation will change in the future.

One of the factors that explains the greater amount of debt is that assets from the bankrupt estate of Landsbanki bank will not be returned until 2011 because of legal entanglements. That makes the estimation for the Icesave debt higher.

In addition, the Central Bank plans to seek a loan of 300 billion ISK to strengthen the currency reserve on top of the loans taken before third quarter of 2009.

Another contributing factor is the bonds between the old and the new banks, valued at 314 billion ISK, are now being handled as foreign debt although formally, the old banks are now domestic parties.

Further, a loose estimation of debt write-offs because of bankruptcies of other companies than financials was done, but their debt was taken into the debt assessment of the Central Bank. It is estimated that 300 billion will be written off.

Finally, other reassessments of debts were calculated at 400 billion ISK.

The gross debt of the public sector is estimated at 2,024 billion or 129 percent of GDP. The debt without the Icesave debt is estimated at 1,794 billion or 114 percent of GDP.

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