According to schedule, the economic stabilization program for Iceland will be reviewed by the executive board of the International Monetary Fund on Wednesday next week. The updated program was sent to the IMF’s managing director yesterday.
Copyright: Icelandic Photo Agency.
If the board accepts the program, Iceland will be granted access to the second part of the IMF’s loan, USD 168 million (EUR 104 million), and a quarter of the loans from the Nordic countries and Poland, USD 675 million (EUR 419 million), Morgunbladid reports.
According to Fréttabladid, Mark Flanagan, who supervises Iceland’s affairs at the IMF, said in an interview on the IMF website that Iceland’s foreign debt is higher than expected when the fund first started negotiating with Iceland.
However, Iceland’s economy can handle the debt, Flanagan added, explaining that it will decrease rapidly when assets of the failed banks are sold and their debt written off to a large extent.
In explanation of the delay in reviewing Iceland’s economic stabilization program, Flanagan stated it had been caused first by an unstable political environment and the elections in spring, and then the delay of agreements with foreign lenders, which made the funding of loans more complicated.
Left-Green MP Lilja Mósesdóttir interprets the IMF’s postponement of loan disbursements to Iceland as such that the fund has canceled its economic stabilization program with Iceland unilaterally.
She told Morgunbladid that Iceland had fulfilled its part of the program while the IMF did not and therefore a new economic stabilization program is needed.
In an interview with RÚV, Mósesdóttir explained that as the debt load on the national economy is higher than expected in November, when the economic stabilization program was made, the program must be changed.
Interests must be lowered, the loan requirement reevaluated and cutbacks softened, she argued, adding that if the IMF doesn’t accept radical changes to the program, the fund has proven unable to assist Iceland.
In Mósesdóttir’s view, the IMF should assist Icelandic authorities on renegotiating with foreign lenders on lower interests and write-offs to spare the state treasury and the national economy from insolvency, which might happen as soon as next year.
Mósesdóttir said that, among other matters, this applies to Icesave. She has not yet decided whether she will support the government’s new Icesave bill. First she would like to see how the state is supposed to pay interest rates with little or no economic growth.
Mósesdóttir said her views on the IMF are echoed throughout the Left-Green Movement, which forms the government coalition with the Social Democrats.
The two coalition parties have been at odds on Icesave before—last month Ögmundur Jónasson of the Left-Greens stepped down from the cabinet due to disagreement with other ministers on how to progress in the Icesave case.
Click here to read more about Icesave and the IMF.