Iceland’s Credit Default Swap (CDS) level has plummeted this week and now stands at 285 points, compared to 600 at the beginning of the year. Economists say the improvement is partly down to IMF statements of confidence that the country is recovering well.
The CDS level is the cost over base interest needed to insure sovereign debt and the lower the number, the better. The massive improvement this year for Iceland will have a positive effect on the national budget.
Olafur Isleifsson, economics lecturer at the University of Reykjavik, told RUV that the position of the national treasury has improved – in co-operation with the IMF – and has been able to secure enough currency for central bank reserves. This reduces sovereign risk to lenders and decreases the cost of borrowing.
Iceland is now considered the 11th most likely nation to default on debt. It was in the top ten almost constantly since the banking crisis in 2008.
