REYKJAVIK, ICELAND (BNO NEWS) — The government of Iceland, whose banking sector suffered a dramatic collapse nearly four years ago, repaid more than 1 billion euros ($ 1.3 billion) in loans to the International Monetary Fund (IMF) and Nordic countries this week, officials said on Friday.
Iceland’s economy has recovered rapidly after the country’s three commercial banks collapsed as a result of huge debts in October 2008, nearly wiping out the banking sector and causing thousands of citizens to lose all their savings. The IMF loaned Iceland about $ 2.1 billion (€1.6 billion) to stabilize the island’s economy.
An IMF spokesperson said Iceland repaid about $ 483.7 million (€385 million) on Friday, nearly two years ahead of schedule. It follows a payment of $ 443.4 million (€352.9 million) on March 12, which was a year earlier than planned under the original repayment schedule. Iceland now owes the IMF $ 987.3 million (€785.9 million), which is to be repaid before 2016.
But the European island country also repaid several other loans this week. The Central Bank of Iceland said it repaid approximately 674 million euros ($ 846.6 million) to Nordic countries, bringing the total repayments to Nordic countries under the IMF-led Stand-By Arrangement (SBA) to 59 percent. This is nearly six years ahead of schedule for some of the loans.
“The decision to make the payment comes in the wake of the Treasury’s international bond issue in the amount of USD 1 billion this May,” the Central Bank of Iceland said in a statement earlier this week. “The bond issue confirms Iceland’s access to foreign capital markets and gives the authorities the flexibility to repay other shorter-term loans taken under the SBA.”
The Central Bank said the bond issue and repayments do not affect the Treasury’s net debt, but they increase gross debt by approximately 2.6 percent of Gross Domestic Product (GDP), as a portion of the borrowed funds are used to pay down debt recognized in the Central Bank’s accounts. Iceland’s external debt position has now been reduced by approximately 2.6 percent of GDP, but the net debt position is unchanged.
Powered by a surge in exports, tourism and domestic consumption, Iceland’s GDP increased 2.4 percent quarter-on-quarter in the first three months of this year. This put annual economic growth at 4.5 percent in the period, which is the highest since the first quarter of 2008.