Typical street scene in Santa Ana, El Salvador. (Photo: iStock)
IMF Survey: IMF and Iceland Outline $2.1 Billion Loan Plan
October 24, 2008
- IMF staff mission and Icelandic authorities reach outline loan agreement
- Two-year Stand-By loan would support agreed economic program
- Aim to restore confidence in banking system and stabilize currency
The IMF announced an initial agreement with Iceland on a $2.1 billion two-year loan to support an economic recovery program to help the island restore confidence in its banking system and stabilize its currency.
Fish stored in ice in Reykjavik, Iceland: loan program goal is to support Iceland's effort to adjust to economic crisis (photo: Olivier Morin/AFP)
FINANCIAL TURMOIL
Following review by the IMF's management, the agreement could be presented to the IMF Executive Board for approval in early November. Iceland would be able to draw $833 million immediately after Board approval.
"Iceland has put together an ambitious economic program, which aims to restore confidence to the banking system, to stabilize the krona through strong macroeconomic policies, and to help the country achieve medium-term fiscal consolidation following the collapse of its banking system," said IMF Managing Director Dominique Strauss-Kahn. "I believe these strong policies justify the high level of access to Fund resources—equivalent to 1,190 percent of Iceland's quota in the IMF—and deserve the support of the international community.
"The authorities' program is focused on the essential upfront measures needed to restore confidence and economic and financial stability. The overarching goal is to support Iceland's effort to adjust to the economic crisis in a more orderly and less painful way," Strauss-Kahn said.
Talks with several countries
The IMF, which has announced its readiness to lend billions of dollars to support nations hit by fallout from the global financial turmoil, is holding talks with several countries about possible new lending programs, as well as advising governments how to react to the economic downturn.
The IMF is in discussions with a number of other countries about possible financing needs, and is providing confidential policy advice to governments in emerging and developing economies on how to adapt to the current turmoil.
Loanable funds
The IMF has more than $200 billion of loanable funds and can draw on additional resources through two standing borrowing arrangements with groups of IMF member countries.
Strauss-Kahn, who helped spearhead the international response to the global financial turmoil during the IMF-World Bank Annual Meetings in Washington on October 10-13, has emphasized the IMF's readiness to lend quickly to member countries that need help during the ongoing crisis through its emergency financing procedures.
The IMF says the financial turmoil hitting advanced economies is starting to slow growth in many emerging markets. The world economy is entering a major downturn in the face of the most dangerous financial shock in mature financial markets since the 1930s, according to the IMF's World Economic Outlook.
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