IMF to disburse £102 mln to Iceland

 

he International Monetary Fund on Wednesday approved a long-delayed review of Iceland's economic performance under its IMF rescue package and agreed to disburse a $167.5 million (102.3 million pounds) loan tranche.

The IMF said it also extended Iceland's $2.2 billion program by six months to May 31, 2011 "to compensate for delays in program implementation and reviews." In addition, it agreed to reschedule the remaining loan disbursements.

The review was delayed for several months because of an international dispute over what to do about foreign savers who lost money when three of the country's largest banks collapsed in October 2008, forcing the economy into a deep recession.

IMF rescue efforts were further complicated by the collapse of Iceland's conservative government which agreed to the IMF accord in November 2008.

Iceland's Minister of Economic Affairs Gylfi Magnusson said the IMF's decision would also free up an additional $625 million in loan disbursements from the governments of Denmark, Norway and Sweden, and help restore investor confidence in the country.

"We fully expect that the trust of international financial markets will continue to grow as a consequence as Iceland has met major goals in its economic program and is supported in this effort by the IMF and Nordic and Polish partners" Magnusson said in a statement.

During a news conference in the capital Reykjavik, Magnusson said the funds would go towards covering Iceland's deficit, repaying loans and stabilizing the domestic currency, the crown.

Magnusson also said it would begin to relax currency controls at the weekend by allowing for freer inflows of money and withdrawals.

Iceland introduced forex controls a year ago to stem a massive outflow of funds following the collapse of its bankings system and currency.