Washington: The International Monetary Fund approved a two-year, $2.1 billion support program for Iceland designed to restore confidence and stabilize the country’s shattered economy.
The approval had been held up because of a British-Icelandic dispute over Britons’ accounts in failed Icelandic banks.
The IMF agreed last month to lend Iceland $2.1 billion and help the country raise $3.9 billion in loans from other countries. Britain held up the approval with the argument that Iceland first should pay back British citizens’ deposits in failed Icelandic banks.
After the IMF announcement, four Nordic countries agreed to lend Iceland $2.5 billion, Finland’s Finance Ministry said. The four countries agreeing to the package were Finland, Sweden, Norway and Denmark.
Iceland needs the financing to buy imports and support its currency, which has lost around two-thirds of its value since the beginning of the year because of the collapse of its banking system.
Both the IMF and the European Union, of which Iceland is not a member, told Reykjavik that they would not give loans to Iceland until the dispute with Britain was settled. On Sunday, Icelandic Prime Minister Geir Haarde agreed to guarantee the money.
Iceland earlier had said depositors would get up to $26,600. While Iceland is not part of the EU, its membership in the European Economic Area allows the country to participate in a free economic zone along with European Union member states.