International Monetary Fund approves Iceland's request for a two year stand-by arrangement
Iceland will receive USD 2.1 bn. from the IMF. Additional loans of up to USD 3 bn. have been secured from Denmark, Finland, Norway, Sweden, Russia and Poland. The Faroe Islands have announced that they would lend Iceland USD 50 million.
Of the IMF loan, USD 827 million will be immediately available with the remaining sum made over in eight equal installments of about USD 155 million each, subject to quarterly reviews. The IMF program will last two years and Iceland will repay the loan over the years 2012-2015.
The funds made available through the IMF will be used to support the currency, the Icelandic krona, which will be floated as soon as possible. It is to be expected that the currency market will stabilize soon and that international money transfers will subsequently return to normal.
The Government of Iceland welcomes the action taken by the IMF, its Nordic neighbours, Russia, Poland and the Faroe Islands which it sees as a very positive step towards bringing financial stability after a period of uncertainty.
Prime Minister, Geir H. Haarde said:
"We welcome the announcement made by the IMF today which I believe is an important step forward towards the rebuilding of our economy. With the IMF agreement in place, we can commence our recovery program with full force and bring our economy back on track. I thank those countries who also contributed to the loan package. Our task now is to overcome the difficulties we face and to regain the trust and the standing among other nations which we enjoyed before the impact of the global financial crisis struck Iceland".
Minister for Foreign Affairs, Ingibjörg Sólrún Gísladóttir said:
"We appreciate the approval from the IMF and the trust in Iceland which it represents. 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."
Additional press and media service:
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Background on Prime Minister Geir H. Haarde
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Background about Iceland
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Iceland in short:
Iceland is an island of 103.000 km2 (39,756 sq.miles), with only 313.000 inhabitants, is about one-third larger than Scotland or Ireland. Its highest peak, Hvannadalshnjúkur, rises to 2.119 m and over 11 per cent of the country is covered by glaciers, including Vatnajökull, the largest in Europe. Energy: Situated on the Mid-Atlantic Ridge, Iceland is a hot spot of volcanic and geothermal activity: 30 post-glacial volcanoes have erupted in the past two centuries, and natural hot water supplies much of the population with cheap, pollution-free heating. Rivers, too, are harnessed to provide inexpensive hydroelectric power. People: Of the 313.000 citizen, more than half live in the capital Reykjavík and its neighbouring towns in the southwest. Keflavík International Airport is located about 50 km from the capital. Language: Iceland was settled by Nordic people in the 9th century - tradition says that the first permanent settler was Ingólfur Arnarson, a Norwegian Viking who made his home where Reykjavík now stands. The Icelanders still speak the language of the Vikings, although modern Icelandic has undergone changes of pronunciation and, of course, of vocabulary! Iceland is alone in upholding another Norse tradition, i.e. the custom of using patronymics rather than surnames; and Icelander's Christian name is followed by his or her father's name and the suffix -son or -dóttir, e.g. Guðrún Pétursdóttir (Guðrún, daughter of Pétur). Members of a family can therefore have many different "surnames", which sometimes causes confusion to foreigners! History: In 930, the Icelandic settlers founded one of the world's first republican governments; the Old Commonwealth Age, described in the classic Icelandic Sagas, lasted until 1262, when Iceland lost its independence, and in 1944 the present republic was founded. The country is governed by the Althing (parliament), whose 63 members are elected every four years. Four-yearly elections are also held for the presidency; President Ólafur Ragnar Grímsson was elected in June 1996 to succeed Vigdís Finnbogadóttir, and was re-elected in June 2000. The head of state plays no part in day-to-day politics. Economy: Iceland has all the characteristics of a modern welfare state. National income per capita was somewhat above the EU average in 2007. Iceland has largely built on its comparative advantages in abundant marine and energy resources although the main driver of economic growth recently has been services with two-thirds of the working population employed in the service sector, both public and private. Fish and other marine products were the mainstay of an export oriented economy until early 2008, when exports of aluminium smelting products emerged as the largest single export product accounting for 40% of total export revenue. Export of services such as tourism have also been growing and account for almost one-fifth of total export revenue. Iceland is a member of the European Free Trade Association (EFTA) and the European Economic Area (EEC). Health: Life expectancy, at 81.3 years for women and 76.4 for men, is one of the highest in the world, and a comprehensive state health-care system aims to keep it that way.