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Poland pledges $200m to Icelandic aid package
Poland's Finance Ministry said it agreed to lend Iceland $200 million, part of a $6 billion aid package from a group led by the International Monetary Fund following the collapse of the island's banking system.
- Bloomberg
- Published: 23:20 November 7, 2008
Warsaw: Poland's Finance Ministry said it agreed to lend Iceland $200 million, part of a $6 billion aid package from a group led by the International Monetary Fund following the collapse of the island's banking system.
Poland joins the IMF, Norway the Faroe Islands, which have pledged about $2.8 billion to help revive Iceland's economy.
There is no formal accord on the entire $6 billion package, said Greta Ingthorsdottir, an adviser to Iceland's Prime Minister Geir Haarde.
The aid package "is about buying time," said Thomas Haugaard, senior economist at Svenska Handelsbanken AB in Copenhagen. "It's not a permanent solution" to the banking crisis and the paralysis of its foreign exchange market.
Inflation worries
Iceland needs money to shore up its economy which the central bank on Friday predicted would contract 8.3 per cent next year as inflation accelerates.
If the government succeeds in preventing a further collapse of the currency, inflation will average 14.1 per cent in 2009, the bank forecast.
The group of countries aiding Iceland also includes Scandinavian countries, the UK and the Netherlands, the Polish Finance Ministry said in an e-mailed statement.
Magdalena Kobos, a spokeswoman for the ministry, confirmed the authenticity of the statement by telephone.
"I am not aware that other Nordic countries - Sweden, Denmark or Finland - have yet made any concrete decisions on funding or that there would even have been any discussion on the shares of different countries," said Ilkka Kajaste, Deputy Director General at Finland's Finance Ministry.
"It will take quite a long time to stabilise the macro-economic environment," Haugaard said.
The IMF executive board on Friday postponed until November 10 a meeting to approve a loan of $2.1 billion for Iceland, Prime Minister Geir Haarde told lawmakers.
The IMF said on October 30 the board would consider the loan on November 5. Norway has pledged 500 million euros ($642 million) and the Faroe Islands has agreed 300 million Danish crowns ($52 million).
"We haven't reached the stage where we've committed ourselves to a specific amount," said Per Jansson, state secretary at the Swedish Finance Ministry. "Our ambition is to reach a solution as soon as possible."
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