The executive board of the International Monetary Fund (IMF) approved Iceland’s request for a loan last night. The IMF will contribute USD 2.1 billion (EUR 1.7 billion) and the Nordic countries (Norway, Sweden, Denmark, Finland and the Faroe Islands), Russia and Poland USD 3 billion (EUR 2.4 billion) in additional loans.
USD 827 million (EUR 653 million) of the IMF loan will be immediately available with the remaining sum made over in eight equal installments of about USD 155 million (EUR 122 million) each, subject to quarterly reviews. The IMF program will last two years and Iceland will repay the loan between 2012 and 2015, according to a press release from the Icelandic government.
Prime Minister Geir H. Haarde and Foreign Minister Ingibjörg Sólrún Gísladóttir announcing Iceland’s decision to apply for a loan from the IMF on October 24. Copyright: Icelandic Photo Agency.
“We welcome the announcement made by the IMF today [November 19] which I believe is an important step forward towards the rebuilding of our economy. With the IMF agreement in place, we can commence our recovery program with full force and bring our economy back on track,” said Prime Minister Geir H. Haarde, adding:
“I thank those countries who also contributed to the loan package. Our task now is to overcome the difficulties we face and to regain the trust and the standing among other nations which we enjoyed before the impact of the global financial crisis struck Iceland.”
Foreign Minister Ingibjörg Sólrún Gísladóttir commented: “We appreciate the approval from the IMF and the trust in Iceland which it represents. The participation of the IMF in rebuilding the Icelandic economy is very important. It gives us a solid platform for re-establishing the credibility which will be necessary in restructuring a viable Icelandic economy.”
The funds made available through the IMF will be used to support the currency, the Icelandic króna, which will be floated as soon as possible. It is to be expected that the currency market will stabilize soon and that international money transfers will subsequently return to normal.
The IMF had repeatedly postponed their decision-making on Iceland’s request for a loan because of Iceland’s dispute with Britain and the Netherlands on Landsbanki’s Icesave deposits in their countries. But a solution to that dispute was reached on Sunday.
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