IMF concludes its visit

During the past two weeks an International Monetary Fund (IMF) mission has been working with Icelandic authorities on the first review of the economic recovery programme and IMF Stand-by Arrangement for Iceland. Under the direction of Mark Flanagan, mission members have met with numerous interest groups to acquaint themselves with developments in Iceland and the effects of the economic recession.

At their meetings the Icelandic authorities and IMF have discussed the economic and financial outlook, the progress of the economic recovery programme to date, the policy of the current government and implementing the recovery programme in coming quarters. These discussions have been very constructive and the expert assistance provided by the IMF in many instances has proved very helpful.

Discussions have focused on near-term fiscal strategy, a schedule for relaxing currency controls and lowering interest rates, a new time scale for the reconstruction of the banking system and debt mitigation for households.

The programme agreed by the government and IMF is reviewed quarterly and concludes in each instance with a Letter of Intent (LoI), based on the first LoI agreed in November last year, but reflecting developments since then and discussions between the parties. The LoI describes actions taken by the authorities and maps out the strategy for coming quarters. In coming weeks a few technical matters concerning the programme will be resolved. Following this a new LoI will be submitted to the IMF Executive Board for consideration. The fund is expected to finalise the matter in the spring months, following which the second instalment of the IMF loan to Iceland will be disbursed.

The total amount of the IMG Stand-by Arrangement for Iceland is USD 2.1 billion. Of this amount, USD 827 million have already been made available to the Central Bank of Iceland through the Federal Reserve Bank of New York.

A new LoI and report from the IMF mission will be published once the IMF executive has concluded its discussion of the matter.

Reykjavík 13 March 2009