Iceland Program Summary

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Page 187

Long-term growth prospects for Iceland are favorable, in line with the country's very strong fundamentals, not least its highly educated labor force, favorable investment climate, and rich natural resource endowment. The program with the IMF focuses on addressing the key issues at hand:

* Preventing further sharp króna depreciation by maintaining an appropriately tight monetary policy in the context of a flexible exchange rate policy. Restrictions on capital outflows will remain in the near term.

* Developing a comprehensive and collaborative strategy for bank restructuring by (i) putting in place an efficient organizational structure to facilitate the restructuring process; (ii) proceeding promptly with the valuation of banks' assets; (iii) maximizing asset recovery in the old banks; (iv) ensuring the fair and equitable treatment of depositors and creditors of the intervened banks; and (v) strengthening supervisory practices and the insolvency framework.

* Ensuring medium-term fiscal...