Iceland’s finance minister says it will be years until the country can completely eliminate capital controls, despite the fact that the government has managed to repay some of its IMF loans ahead of schedule. Oddny Hardardottir told Reuters that although the $1 billion bond issue earlier this month shows good progress, the road to complete economic recovery is long.
“To eliminate capital controls, the most important thing is that we have to secure access to financial markets. We did that with the $1 billion 10-year bond issue,” Hardardottir said. “Fully removing capital controls will be done in several steps and it’s still years away,” he added.
The tiny island nation had to be bailed out by its Nordic neighbours and the IMF in 2008 when its banking sector collapsed at the start of the global financial crisis. It has since had to impose tough spending cuts and austerity measures and prevent investors from taking their money out of the country.
Iceland’s economy shrunk by 10 percent between 2009 and 2010, but austerity measures have paid off, with the economy growing by 4.5 percent in the first quarter of this year when compared with the same three months of 2011.
“If we think the time is right, we’ll do it [repay early] again,” Hardardottir said. “But the next IMF instalment is not due until 2015 and for the Nordic loans until 2019.”
Hardardottir went on to say that he believes the European Union will emerge stronger from the euro zone economic crisis, adding that Iceland is still very keen to join.
“We want to cooperate with Europe because we do 45 percent of our trade with them,” he said. “Europe has its problems and they’re working on them, and I’m sure they’ll learn from their mistakes, like we did, and they’ll come out of this crisis stronger, like we did. I am sure they are taking the right steps towards that.”