25 March 2011

Report on capital account liberalisation strategy

The Central Bank of Iceland has published a report on capital account liberalisation strategy.

This report contains a new strategy for liberalisation of capital controls. The experience with the previous strategy is discussed, the development of the various conditions for lifting capital controls are described, the two main phases of the strategy are explained in broad terms, and the individual steps of the first phase are outlined in some detail (see Sections III and IV). It is concluded that the conditions are in place for gradual relaxation of some parts of the controls, although more fundamental steps will have to wait until the Treasury has demonstrated through borrowing that it has the ability to refinance foreign loans. This has long been delayed, partly as a result of the still unresolved Icesave dispute. If the Icesave bill is rejected in the upcoming referendum, Phase II and part of Phase I of the strategy could be delayed. Hence, to begin with, the focus will be on steps that will not place strain on the foreign exchange reserves; i.e., auctions whose aim is to direct unstable króna holdings into the hands of long‐term investors.


Capital accounts liberalisation strategy (pdf)