Iceland: Staff Report for the 2001 Article IV Consultation

IMF Staff Country Reports, June 12, 2001

Source details

Iceland has benefited from the policy reorientation introduced just over a decade ago.
The emergence of domestic and external imbalances in recent years is cause for concern.
An urgent task is to lower the risk exposure of the financial system.
The adoption of an inflation targeting framework for monetary policy is commended.
Fiscal policy should address the domestic and external imbalances.
The intention to reinvigorate the privatization program is welcome.
The government should continue to reduce the unfunded liability of the state employee pension scheme.

Subjects covered: Balance of payments, Banking, Current account deficits, Exchange rates, External debt, Foreign exchange, Inflation, Inflation targeting, Monetary policy, Prices.
Keywords highlighted: central bank repo, consumer price inflation, CR, Current account deficits, exchange rate, Exchange rates, Global, government, IMF assessment, Inflation, Inflation targeting, interest rate differential, ISCR, regime switch, telecommunication company.
Identified macroeconomic concerns:
- Domestic imbalances (unspecified magnitudes in source text).
- External imbalances (unspecified magnitudes in source text).
- Elevated financial system risk exposure requiring urgent mitigation.

Monetary policy:
- Continue and maintain the inflation targeting framework.
Fiscal policy:
- Address domestic and external imbalances through appropriate fiscal measures.
Financial sector:
- Lower the risk exposure of the financial system as an urgent priority.
Structural reforms:
- Reinvigorate the privatization program.
- Continue reducing the unfunded liability of the state employee pension scheme.