Iceland close to $2.1B loan from IMF

Island nation could be first Western European country to receive IMF funds in 25 years following its economic turmoil.

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(CNN) -- Iceland is nearing a deal to borrow up to $2.1 billion from the International Monetary Fund to prop up its economy, the IMF and Icelandic Prime Minister Geir Haarde's office announced Friday.

The loan would be the first time the IMF has funneled money to a Western European country in 25 years, when it sent funds to Portugal.

The loan is "equivalent to 1,190% of Iceland's quota in the IMF," IMF Managing Director Dominique Strauss-Kahn said, but he added Reykjavik deserved it because of the "ambitious economic program" it has put together.

The tiny island nation "aims to restore confidence to the banking system, to stabilize the krona through strong macroeconomic policies, and to help the country achieve medium-term fiscal consolidation following the collapse of its banking system."

Iceland's stock market crashed earlier this month and the government nationalized three of the country's biggest banks. Trading on the country's stock market was suspended for nearly a week.

The IMF deal must be approved by the organization's executive board in Washington. Strauss-Kahn said that could happen as soon as early November.

The deal would include an economic stabilization program and access to up to $2.1 billion under a two-year loan. Iceland would have access to $833 million of that money immediately, the IMF said.

"Iceland is now in a much better position to establish a sound economic and financial base for the country," Haarde said in a written statement. To top of page

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