Economic Program With IMG

Economic programme in cooperation with IMF

 

The Icelandic government decided to seek assistance from the International Monetary Fund (IMF) immediately after the onset of the financial crises. An agreement and an economic programme was finalized by October 24 2008.

On November 19th the IMF approved Iceland’s request for a two year stand-by arrangement. Iceland will receive USD 2.1 billion from the IMF. Additional loans of up to USD 3 billion have been secured from Denmark, Finland, Norway, Sweden, Russia, and Poland. The Faroe Islands have announced that they would lend Iceland USD 50 million.

The IMF stand-by arrangement is based on an economic programme outlined in a Letter of Intent. The programme was formulated by the Government and Central Bank of Iceland in close consultation with the IMF.

The programme focuses on three main areas:

  • Stabilizing exchange rate and rebuild confidence in monetary policy.
  • Review and revise fiscal policy with the aim of maintaining a manageable level of public sector debt and debt service in spite of lost revenues and increased expenditures.
  • Banking sector restructuring and reform of the insolvency framework in accordance with transparent, internationally recognized principles.

One overarching goal:

Re-establish confidence in the Icelandic economy.

Further information:

Questions and Answers

Why did Iceland seek cooperation with the IMF?

There are several reasons why Iceland sought cooperation with the IMF.One is that the International Monetary Fund (IMF) is the only internationally recognised institution with an advisory function which assists States going through serious currency crisesRead more

Which parties, apart from the IMF, are involved?

Apart from the team of IMF experts, the Icelandic authorities have called upon international consulting firms, international accounting firms as well as respected domestic and foreign expertsRead more

What are the IMF conditions in regard to Iceland?

It seems more fitting to speak of stages in the work ahead rather than conditions.Read more

Are there any more detailed conditions in any non-published data?

No, both the Icelandic authorities and the IMF have as a principle that the entire plan, along with any supporting documentation and explanations, be published officially as soon as the IMF Executive Board had consented to it.Read more

Does the IMF cooperation leave room for the government to assist Icelandic families and firms?

Yes, because next year when the contraction created by the banking crisis hit with full force, the automatic state fiscal stabilisers will be activated extensively to alleviate the most severe blow by allowing a large budget deficit.Read more

Does the plan stipulate that parties will be held accountable?

Yes, an extensive investigation by impartial foreign experts is specifically mentioned in two of its clauses.

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