Artemova Progress 1

Iceland's central bank had only 2 billion euros in foreign currency reserves — while the banks had reached about 100 billion euros in assets — meaning it was effectively unable to fill its role as lender of last resort.
There is an expectation that tight monetary policy will eventually succeed in slowing the economy, taming inflation and reducing imbalances but its slow and uneven adjustment process leaves the economy vulnerable to foreign investor sentiment changes. It is suggested that priority should be given to reforming the process of public Housing Financing Funds. The implementation of new public investment projects should also be made dependent on progress in cooling down the country's economy.
In these circumstances of banks failure to continue to peg krona at a level of 131 per euro the country realized in October 2009 it needs the help from International Monetary Fund. However, due to existing loan requests from the emerging European countries of Europe and the underlying political factors Iceland could not get the prompt funding from IMF(Table 2a,
As a result of high commodity prices since 2001- 2008 some countries exporting natural resources and involved in real sector of economy accumulated large funds. One example is Russia that has been using extensively its natural gas and oil for export and has become the world’s largest gas exporter and has been trying to initiate creation of an oil cartel (OPEC Style Oil Cartel, 2008). It acquired more than $400bn dollars in Stabilization fund and has been devaluating currency to dollar for the past 8 years (Stabilization Fund, 2009). The unique position of both countries made it possible for Iceland to get the loan of $4bn from Russia.

The implication of this is the home currency of the country is going to be devaluated further, currently 10 % down. (, Jan, 2009)
Iceland after taking the bailout package from Russia takes help from IMF for $1.2Bn which is supposed to stabilize home currency krona and get the banking industry out of being a hedge fund with amassed debts exceeding 220% of disposable income and bring back the banking industry which assets amounted 10 times more than gross domestic product of the country

Table 2a. Current Financial Arrangements (GRA)
Russia, Iran, Qatar Eye OPEC-Style Oil Cartel, Oct 21, 2008
Russia's ruble devaluations gather speed, Jan, 2009,

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