The International Monetary Fund on Friday night sought to play down a rift with Iceland on its $2.1bn (€1.47bn, £1.26bn) loan to the troubled country by insisting the two sides were in agreement over economic policy.
Iceland had earlier vented frustration at the delay of an IMF review that must be completed before the country can receive the next tranche of aid under the rescue package agreed when its banking sector collapsed last October.
However, the Washington-based fund moved to ease tensions by announcing it had “reached agreement on policies to underpin the . . . review” and said the deal would be put to its executive board for approval by early September.
The statement came a day after the IMF postponed its first review of Iceland’s recovery efforts, tentatively scheduled to start next week, holding up the release of more funds.
The delay triggered allegations in Iceland that the IMF had come under pressure from the British and Dutch governments to halt payments amid a dispute over repayment of savings lost in Icelandic bank accounts.
Officials said they suspected the IMF was trying to increase pressure on Iceland’s parliament to ratify a deal to reimburse British and Dutch savers who
lost money in Icelandic accounts.
Reykjavik reached an accord in June to borrow £2.3bn from the UK and €1.2bn from the Netherlands to repay the countries for compensation to
more than 300,000 depositors in the Icesave savings account. But Iceland’s parliament has so far refused to approve the deal, amid mounting public anger over the allegedly harsh terms of the loans.
Britain on Friday denied pressuring the IMF to hold back funds, pointing out that refloating the Icelandic economy with IMF support was crucial to London’s aim of recouping its money.
“The government is fully supportive of the IMF
process with Iceland,” said the UK Treasury.
The IMF refused to be drawn on why the latest review of Iceland’s loan programme had been postponed. In addition to the $2.1bn IMF loan, $2.5bn from its Nordic neighbours is also tied to IMF approval.
Iceland stressed that it had ample foreign currency reserves to cope with a “short-term” delay.
But Johanna Sigurdardóttir, prime minister, made clear her disappointment that efforts to rebuild the economy had gone unrewarded by the IMF.
“Major progress has been made in refinancing the banking system,” she said. “As Iceland has fulfilled all the conditions set for the programme review, it is regrettable that its approval by the executive board will now be postponed.”
The view in London is that Iceland has a tendency to imagine a British or Dutch conspiracy behind any bad news.
Anti-British sentiment has been running high since the UK used anti-
terror laws to freeze Icelandic assets last October. That anger reignited once the full cost of the Icesave compensation deal became clear.
Many Icelanders question why they should foot the bill for foreign savings.
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