Press release no. 1/2012
The bilateral loan facilities negotiated between the Nordic countries and Poland, on the one hand, and Iceland, on the other, in connection with the authorities' IMF-supported economic programme, amount to a total of €1,930 m.
According to the original programme, the Treasury and the Central Bank were to have drawn
the full amount of the Nordic and Polish facilities by year-end 2010, but due
to repeated delays in the IMF Executive Board's reviews of the programme, the
deadline for drawdown was extended until year-end 2011.
At the end of the year, the Ministry of Finance and the Central Bank decided to draw the full
amount of the bilateral Nordic loans. This was considered a cautionary measure,
given the uncertainty currently prevailing in the global credit markets. The
Treasury intends to engage in another bond offering in 2012, following the
successful auction last June.
The December drawdown of the Nordic loan totals €887.5 m, or close to ISK 140 bn, which is being used to expand the Central Bank's foreign exchange reserves. The Polish
loan was not drawn down further, as the parties have agreed to extend the
The loans from the IMF and Norway are to the Central Bank of Iceland,
whereas the other Nordic countries' loans are extended to the Treasury. The
drawdown raises the Treasury's total debt by approximately 7% of GDP and
increases the negative interest balance. The Treasury's net debt does not
change, however. The Ministry of Finance and the Central Bank will continue to
evaluate the need for foreign exchange reserves and related borrowings, with
the aim of reducing both the cost of the reserves and the Treasury's debt.
Reykjavík, 3 January 2012