## Press Release: Statement by the IMF Mission to Iceland

_IMF News, June 28, 2010_

## Source details

**Canonical URL:** [Press Release: Statement by the IMF Mission to Iceland](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr10262)

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## Bibliographic details
- Published: June 28, 2010

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### Mission, mandate, and meetings
- A mission from the International Monetary Fund (IMF), headed by Mark Flanagan, visited Reykjavik during June 14-28 to hold discussions for the 2010 Article IV Consultation and the third review under the US$2.1 billion Stand-By Arrangement (see Press Release No. 08/296).
- The mission met with senior government officials, parliamentarians, academics, representatives of the private sector, and labor organizations.
- Discussions will continue through the coming weeks, with the aim of bringing the review for approval to the Fund’s Executive Board in early September.

### Economic outlook and policy stance
- “While Iceland’s economy has technically emerged from the post-crisis recession, headwinds and risks remain significant.”
- The recovery is expected to gather momentum towards the end of the year, and “with prudent monetary policy, the recent success in stabilizing the currency and reducing inflation can continue.”

### Financial sector and implications of Supreme Court ruling
- “The financial sector faces some balance sheet uncertainty in the wake of the recent Supreme Court ruling on loans indexed to foreign exchange rates.”
- System stability is not at risk given the government’s blanket deposit guarantee.
- The ruling “may have potential implications for public finances, the pace of capital control liberalization, and other aspects of the program.”
- Final agreement with the mission on policies needed to complete the review will require clarification of the implications of the ruling.

### Household and corporate debt restructuring
- “The mission welcomes the changes to the household debt restructuring framework introduced last week.”
- Both household and corporate debt restructuring “must be accelerated to support Iceland’s recovery.”
- Key near-term actions include:
  - establishing and expanding the Debtors’ Ombudsman office,
  - approving sufficient bank guidelines for corporate debt workouts.
- “Attention should now shift to making the framework function well.”

### Fiscal policy and the 2011 budget
- “The government has made significant progress in preparing the budget for 2011.”
- The planned 3 percent of GDP fiscal adjustment can deliver a primary surplus and a reduction in Iceland’s public debt, provided:
  - budget implementation stays on track in 2010, and
  - banking sector contingencies are small.
- Spending reductions are the bulk of the proposed adjustment, and “the focus of the work should now be on translating approved administrative reductions into concrete measures.”

*Press Release No. 10/262, June 28, 2010.*

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## References

- [Iceland and the IMF](http://www.imf.org/external/country/ISL/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [Press Release No. 08/296](https://www.imf.org/external/np/sec/pr/2008/pr08296.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr10262_