A delegation of the International Monetary Fund (IMF) is visiting Iceland. In a news conference yesterday, it warned the Icelandic government against pursuing continued lax fiscal policies during the current economic expansion. While the economic growth, brought about to a large extent by investments in heavy industry, was commendable, the role of the government must be to regulate the consequent economic upswing, not amplify it. Specifically, the IMF advised the government to postpone scheduled tax-cuts and reduce government spending until after the currently ongoing heavy industry investment projects are completed.
The IMF mentioned inflation and the substantial supply of foreign loans as two possible danger signs for the economy.
