Tags: IMF | Iceland | Loan | Payment

IMF, Iceland Reach Deal on $159 Million Loan Payment

Friday, 09 Apr 2010 04:15 PM

The International Monetary Fund and Iceland on Friday announced agreement on the conditions for a controversial $159 million IMF loan payment, requiring IMF board approval.

"Agreement has been reached on a letter of intent for the second review under Iceland's Stand-By Arrangement with the IMF," Mark Flanagan, the IMF mission chief to Iceland, said in a statement in Washington, where the Fund is based.

The executive board was "tentatively" set to discuss the review on April 16, he said.

Upon completion of the review, Iceland would become eligible to draw the controversial third installment of a $2.2 billion dollar IMF loan authorized in November 2008.

The Icelandic ministry of economic affairs, in a separate statement announcing the agreement, said that the letter of intent to the IMF "describes the progress made so far in limiting the impact of the crisis and setting the stage for a sustained recovery."

The letter will be made public after the IMF board approval, the ministry said.

The agreement caps intensive work in recent weeks by IMF and Icelandic officials aimed at "eliminating obstacles in the way of completing the second review" of the loan arrangement, the ministry said.

Gylfi Magnusson, Iceland's economic affairs minister, met with IMF managing director Dominique Strauss-Kahn and executive directors in Washington on Wednesday.

Only half of the huge loan has been disbursed so far, in two installments, with the last one made in October.

The much-delayed third disbursement has been embroiled in a conflict with IMF members Britain and the Netherlands.

The IMF board, where Britain and the Netherlands have a vote, had refused to place the payment of fresh installments of the loan on its agenda in a dispute over compensation for the collapse of online Icelandic bank Icesave.

In an early March referendum, voters in Iceland overwhelmingly rejected an arrangement under which the government would pay Britain and the Netherlands 3.9 billion euros ($5.26 billion) to compensate British and Dutch savers who lost money in the collapse of Icesave in October 2008.

Iceland officials have warned that if the loan continues to be blocked, Iceland's recession could deepen this year.

© AFP 2015

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