Likely second IMF payment to Iceland in July

imf-logoJohanna Sigurdardottir, Prime Minister of Iceland, said in Iceland’s Althingi parliament yesterday that the country’s economy has not been adversely affected by the delay in payment of the second part of the IMF loan, as the first instalment has not been spent. The current goal remains to get the delayed second portion of the loan paid to Iceland in July.

“Some people have been saying that this is having an effect on the exchange rate of the krona – but it actually makes no difference when the loan is paid out because the country’s current finances are perfectly adequate to back the krona as long as the current exchange restrictions are in place,” Sigurdardottir said.

She went on to explain that if Iceland had received the due second payment already it would be costing the country money in interest. As it is, the money from the first payment from the IMF and other Nordic nations is still sitting unused in a bank account.

Sigurdardottir’s comments came in response to a question by Einar K. Gudfinnsson, and Independence Party MP. His question concerned the delay to the second payment, reports. He said it was a question of trust in the nation and the IMF’s delay tactics could well have a strong effect on the Central Bank’s upcoming policy rate decisions. Gudfinnsson said the government’s answers so far have been very unclear.

The Prime Minister responded that there have been several reasons for the delay in talks with the IMF. Among them is the need to make progress in finalising the recapitalisation of the banks before the loan will be paid – which can hopefully be at the beginning of July.

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