Iceland repays IMF more in advance

The Central Bank of Iceland has decided to repay in advance part of the financing received by Iceland from the International Monetary Fund (IMF) after the financial crisis hit the country in the autumn of 2008 with the collapse of its three largest banks at the time. The repayment wasn't scheduled until next year.

The payment amounts to 50 billion krónur or about 394 million dollars. With this payment Iceland has repaid 83 percent of the IMF financing. The total amount received from the IMF was 253 billion krónur or about 2 billion dollars. After this payment the outstanding debt to the IMF is approximately 43 billion krónur or about 339 million dollars. The purpose of the repayment is to reduce short-term debt according to a statement issued by the Central Bank today.

„The decision to prepay is a debt management exercise to reduce short-term debt. It was taken in view of the Central Bank’s relatively abundant liquidity position, which stems in part from intervention in the domestic foreign exchange market. The financing in question was on the balance sheet of the Central Bank, therefore this prepayment will affect Central Bank debt but not Treasury debt. The Bank’s foreign exchange reserves will decline by the amount of the payment. At the end of November, the foreign exchange reserves totalled 566 b.kr.“

This is not the first time Iceland has repaid in advance parts of the IMF financing received after 2008. Two early payments were made in 2012. Earlier this year the Icelandic authorities also paid up in advance loans received from the other Nordic countries after the economic crisis.