Iceland won approval for a $2.1 billion loan from the International Monetary Fund to help resurrect the island's economy after the failure of its biggest banks and the collapse of its currency.
The country will receive $2.1 billion from the IMF with up to $3 billion in additional secured from Denmark, Finland, Norway, Sweden, Russia and Poland. The Faroe Islands will lend $50 million.
"With the IMF agreement in place, we can commence our recovery program with full force and bring our economy back on track," Prime Minister Geir Haarde said in an e-mailed statement. "I thank those countries who also contributed to the loan package."
The loan aimed at stabilizing Iceland's currency, shoring up its banks and restoring confidence, the IMF said.
The country, which had the fifth-highest per capita income in the world last year, needs the financing to pay for imports and to create enough foreign reserves to support a free-floating currency.
"The participation of the IMF in rebuilding the Icelandic economy is very important. It gives us a solid platform for re- establishing the credibility which will be necessary in restructuring a viable Icelandic economy," Foreign Minister Ingibjorg Solrun Gisladottir said in the statement.
Approval of the loan had dragged out after Iceland was unable to reach agreement with UK and Dutch officials on how to cover foreign deposits held at one of the island's bankrupt lenders, Landsbanki Islands hf. The country struck a deal ending that dispute on Nov 16.
The IMF said about $827 million would be made available immediately and the rest in eight installments of about $155 million, subjected to quarterly reviews.
Raising foreign reserves will allow the central bank to restore the currency to a free-floating regime, a necessary step to reviving the economy given its reliance on imports and capital inflows, according to Handelsbanken economist Thomas Haugaard.
Imports made up 45 percent of gross domestic product last year, according to the statistics office.
Source:China Daily/Agencies
|
Comment
Tell A Friend
Print Format
Save Article