First review of Iceland's economic programme with the IMF completed
At a meeting in Washington DC earlier today the Executive Board of the International Monetary Fund (IMF) completed its first review of the Icelandic government‘s economic programme. Following this review the board will enable the disbursement of USD 167,5 m (ISK 21 bn). The government also expects that the Danish, Norwegian, Swedish and Finnish governments will enable the disbursement of USD 625 m (ISK 78 bn) directly following this decision by the board.
„We welcome this milestone which is a significant acknowledgement of the progress made in our economic policy and in the revitalization of our financial system over the last few moths. 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 programme and is supported in this effort by the IMF and Nordic and Polish partners,“ said Gylfi Magnusson, Minister of Economic Affairs.
The first review was planned for February or March this year. The next review is now scheduled for December 2009. As the programme has been delayed, the authorities have requested that the arrangment with the Fund be extended by six months, until May 31 2011.
At each periodic review of the economic programme the Icelandic government sends an updated letter of intent to the IMF‘s executive board. The original letter of intent states that the government‘s policy is oriented towards stabilizing the currency, restoring the financial system to health, and securing medium-term fiscal sustainability. The government has worked diligently towards these objectives, but requests waivers for certain criteria as the milestones have not been met within the time-frame set out in the original economic plan. The fund‘s executive board agreed to these waivers with respect to the central government net financial balance, net international reserves and capital injection into three new banks. The board also took into consideration the current restrictions on capital transfers.
Letter of Intent (pdf)