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IMF approves $2.1bn Iceland loan | IMF approves $2.1bn Iceland loan |
(about 7 hours later) | |
The International Monetary Fund (IMF) has approved a $2.1bn (£1.4bn) loan for Iceland, after the country's banking system collapsed in October. | The International Monetary Fund (IMF) has approved a $2.1bn (£1.4bn) loan for Iceland, after the country's banking system collapsed in October. |
The loan is meant to help the country "restore confidence and stabilise the economy", the IMF said in a statement. | |
Iceland is the first Western European nation to get an IMF loan since 1976. | Iceland is the first Western European nation to get an IMF loan since 1976. |
After the announcement Finland, Sweden, Norway and Denmark said they would lend Iceland a further $2.5bn, a Finnish Finance Ministry official said. | |
The move comes after Iceland's Prime Minister Geir Haarde told Nordic countries that Iceland needed about $6bn to handle the meltdown. | |
Last month the IMF said it would provide Iceland with $2.1bn and help it access $3.9bn from other countries. | |
The IMF's two-year loan, which is subject to quarterly review, allows the country to withdraw about $827m now, and the rest in eight instalments of some $155m. | |
The loan was designed to help the country cope with what the IMF described as "a banking crisis of extraordinary proportions". | |
Contracting economy | Contracting economy |
Iceland was forced to take over three of its biggest, debt-laden banks last month. | Iceland was forced to take over three of its biggest, debt-laden banks last month. |
The Nordic nation's troubles have had severe repercussions elsewhere in Europe. | The Nordic nation's troubles have had severe repercussions elsewhere in Europe. |
In the UK, individual savers and local councils have been unable to access funds deposited in Icelandic banks. | In the UK, individual savers and local councils have been unable to access funds deposited in Icelandic banks. |
Iceland's currency, the krona, has almost halved in value this year and banking transactions with other countries have almost completely frozen. | Iceland's currency, the krona, has almost halved in value this year and banking transactions with other countries have almost completely frozen. |
The IMF has warned the country's economy could contract by as much as 10% next year. | The IMF has warned the country's economy could contract by as much as 10% next year. |
Iceland has said the IMF funds will be used to stabilise its currency, reintroduce a flexible interest rate regime and to overhaul its financial regulation system, especially insolvency laws. | Iceland has said the IMF funds will be used to stabilise its currency, reintroduce a flexible interest rate regime and to overhaul its financial regulation system, especially insolvency laws. |
Before going to the IMF, it had been in talks with Russia for a $4bn loan, but discussions broke down. | Before going to the IMF, it had been in talks with Russia for a $4bn loan, but discussions broke down. |