The International Monetary Fund announced last night that its executive board had approved a loan of $2.1 billion for Iceland to help the country rebound from a severe financial crisis.
The two-year loan, accompanied by quarterly reviews, was designed 'to support the country's programme to restore confidence and stabilise the economy,' the IMF said.
It was the first time a country in Western Europe had secured a loan from the IMF since Britain in 1976.
'Iceland is in the midst of a banking crisis of extraordinary proportions. The three main banks, accounting for about 85 percent of the banking system, collapsed within a time span of less than one week,' John Lipsky, acting chairman, said in the statement.
With Iceland 'facing a severe recession', the IMF loan had the goal of stabilising the exchange rate, developing a strategy for the restructuring of banks and ensuring 'medium-term fiscal sustainability,' Lipsky said.
The IMF move makes $827m immediately available, with the rest paid out in eight instalments of $155m.
