IMF Completes Review of Iceland’s Program Skip to content

IMF Completes Review of Iceland’s Program

By Iceland Review

The board of the International Monetary Fund accepted the first review of the economic stabilization program for Iceland last night. This enables the disbursement of loans from the IMF, Poland and the Nordic countries.

Photo by Páll Stefánsson.

“These are good days which show that everything is going up,” Prime Minister of Iceland Jóhanna Sigurdardóttir told Fréttabladid, also referring to the agreement on wage contracts reached between the Confederation of Icelandic Employers (SA) and the Confederation of Labor (ASÍ) the previous day.

The Central Bank of Iceland will now have access to almost ISK 100 billion (USD 800 million, EUR 540 million) to strengthen its foreign currency reserves: USD 167.5 million from the IMF and USD 625 million from the aforementioned countries, Morgunbladid reports.

The foreign currency reserves and the IMF-led loan will not only be used to strengthen the exchange rate of the Icelandic króna but also to guarantee the liquidity of the state treasury in the coming years, explained Minister of Business Affairs Gylfi Magnússon in a press conference.

Magnússon said the first steps will be taken to abolish the currency restrictions in the coming days, pointing out that the currency’s stability within a floating currency arrangement is still the main goal of the monetary policy.

“In the future it is expected that the wide-reaching policy that we have will strengthen the exchange rate of the króna and the foreign currency reserves. This way we create increased flexibility to lower the policy rate and abolish the currency restrictions gradually,” Magnússon added.

“I’m satisfied and relieved because I’ve been waiting for this for a long time,” said Minister of Finance Steingrímur J. Sigfússon, adding, “It is definitely a positive input in that connection,” regarding possible lowering of the policy rate.

The next IMF review is scheduled for December. Due to the delay of yesterday’s review, the economic stabilization program for Iceland has been extended to May 2011. According to Fréttabladid, it will then be evaluated whether Iceland requires all of the loans originally discussed.

Click here to read more about Iceland and the IMF.

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