Iceland’s prime minister pressing IMF for review to determine next batch of bailout funding

Iceland’s premier pressing IMF on bailout review

REYKJAVIK, Iceland — Iceland’s prime minister said Friday she was pressing the International Monetary Fund to hasten a review to determine the next batch of bailout funding for the nation’s struggling economy.

The IMF had been putting off a decision on whether to release the second tranche of its $2.1 billion bailout funds since last year. Iceland is worried that the money could be held up until it settles wrangling with Britain and the Netherlands over a dispute about debt repayments, but the IMF has insisted this wasn’t the case.

Prime Minister Johanna Sigurdardottir said she wrote IMF director Dominique Strauss-Kahn to demand that a review on Iceland’s economy take place as soon as possible.

“It is highly unusual that the Icesave dispute and the review of the IMF be tied together, and that two nations (the U.K. and the Netherlands) can prevent it from taking place,” Sigurdardottir told national broadcaster RUV.

Iceland has not resolved a dispute with Britain and the Netherlands over the repayment of $5.3 billion to the two countries to pay off debts spawned by the collapse of Icesave, an Icelandic Internet bank that collapsed during the international financial crisis.

Talks between the three sides broke down earlier this month, and Sigurdardottir said the British and Dutch governments have not answered calls for new negotiations on Icesave to commence.

The IMF has disbursed about $1 billion to Iceland and said discussions on a second review are ongoing.

Although the body has never explicitly linked delivery of the funds to the reaching of an Icesave deal, it is committed to Iceland repaying its international debt — the months taken to reach the original Icesave deal were responsible for holding up the first tranche of IMF funds last year.

Finland, Norway and Denmark agreed to provide a further $2.5 billion to help the country recover from a deep recession.

Iceland’s Finance Minister Steingrimur J. Sigfusson and Gylfi Magnusson, minister for business and economic affairs, were in Washington on Friday for talks with Strauss-Kahn. Their offices did not immediately respond to calls seeking comment on the progress of the discussions.

Iceland was an early victim of the credit crunch, which sent its debt-fueled economy into free fall. The value of Iceland’s currency collapsed, growth dropped dramatically and unemployment shot up.

Sylvia Hui reported from London.