Fifth Review of Iceland's Economic Recovery Programme approved by IMF Executive Board
The Executive Board of the International Monetary Fund (IMF) today approved the fifth review of the Economic Recovery Programme agreed by the IMF and the Icelandic government. This opens the way for disbursement of the sixth tranche of the Fund's loan provided to the Icelandic government which amounts to around ISK 25.6 billion. In addition, financing assurances by the Nordic countries are also in hand, amounting to ISK 73 billion, to be drawn on as needed.
Before the conclusion of the review, the Icelandic government sent the IMF a new Letter of Intent, describing Iceland's economic policy. The Letter notes that the economy is gradually recovering and that growth will turn positive in 2011, for the first time since the banking crisis. Domestic demand has started growing, inflation is low, the trade balance remains strong and the krona has remained broadly stable. A key challenge for the coming year is to reduce the still-high level of unemployment. The Letter goes on to address the positive outlook for the balance of payments, which is strong enough to support a gradual lifting of capital controls. Furthermore, both public and external debt ratios are expected to decline rapidly.
Material concerning the fifth review will be published next week. The Stand-By Arrangement is set to expire on August 31, 2011.
"The approval of the review signifies the extent of the economic recovery, which we have laid the foundations for during the last few years," said Árni Páll Árnason, Minister of Economic Affairs. "Iceland‘s Stand-By Arrangement has received widespread support within the Executive Board. This support is in no small part due to the success of our fiscal austerity measures for the last two years."
Material concerning the fifth review of Iceland's IMF programme.