08 October 2015

Loan from IMF paid in full

Governor Már Gudmundsson

The Central Bank of Iceland has decided to prepay in full the remaining balance on the loan taken from the International Monetary Fund (IMF). The prepayment amounts to about 42 b.kr. (SDR 237 million), and the loan in question mature in 2015 and 2016. The Central Bank’s foreign liquidity position is good at present, in part because of the Bank’s purchases in the domestic foreign exchange market. As a result, there is scope to reduce short-term foreign-denominated liabilities.

The prepayment reduces the foreign debt of the Icelandic economy and the Central Bank. The Bank was the borrower, as it is a member of the IMF on behalf of the Icelandic Government; therefore, there is no direct impact on Treasury debt. The foreign exchange reserves will be reduced as a result of these debt management measures.

The loan from the IMF was taken under the Stand-By Arrangement (SBA) reached between the Icelandic authorities and the IMF in the wake of the banks’ collapse in October 2008. The total amount of the loan, taken in tranches under the SBA, was about 250 b.kr. (SDR 1,400 million) at the time the IMF programme concluded in August 2011. Iceland also borrowed funds from the Faeroe Islands, Poland, and the Nordic countries in the amount of 304 b.kr (1,970 million euros) under the SBA but repaid that loan in advance in 2012-2015. With the prepayment of the IMF loan, the Fund’s post-programme monitoring will end. 

According to Central Bank Governor Már Guðmundsson, the early retirement of the IMF loan is a sign of the success of the programme and Iceland’s effective collaboration with IMF staff.

Further information can be obtained from Már Guðmundsson, Governor of the Central Bank of Iceland, at tel: +354 569-9600.

Press release no. 21/2015
8 October 2015