Stockholm/Helsinki - Nordic neighbours of cash-strapped
Iceland said Thursday they have approved a 2.5-billion-dollar loan,
supplementing a similar loan from the International Monetary Fund
(IMF).
The announcement came the day after the executive board of the IMF
approved a two-year 2.1-billion-dollar loan.
'We stress that, as outlined in the IMF programme, an ambitious
multi-year fiscal consolidation programme will help Iceland stabilize
the economy, including the exchange rate, and reduce public debt over
the medium-term,' the finance ministers of Denmark, Finland, Norway
and Sweden said in a joint statement.
The finance ministers said 'implementing the IMF programme will
not be easy,' but they believed it could help rebalance Iceland's
economy.
In Washington, the IMF said Wednesday the standby arrangement was
structured so that Iceland could immediately draw about 827 million
dollars, with the rest in eight installments of about 155 million
dollars - to stabilize a 'banking crisis of extraordinary
proportions.'
The global financial crisis sparked the collapse of three of
Iceland's major banks and a rapid depreciation of the krona.
The nation is facing a severe recession through 2010, the fund
said in a statement.
The IMF forecast that Iceland's economy would be badly damaged,
with real gross domestic product falling 9.6 per cent next year after
an expected 1.6-per-cent advance in 2008.
It estimated that the unemployment rate would quadruple to 5.7 per
cent next year.
However, once confidence is restored and balance sheets
readjusted, the IMF predicts domestic demand to rebound strongly in
2011.
'Iceland's long-term growth prospects remain favourable,
buttressed by its very strong fundamentals of a highly educated
labour force, a favourable investment climate, and a rich natural
resource endowment,' said John Lipsky, the IMF's first deputy
managing director, in a statement.
USA
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