This paper examines key findings of Iceland’s Request for a Stand-By Arrangement from the IMF. Iceland’s economy is in the midst of a banking crisis of extraordinary proportions that is expected to lead to a deep recession, a sharp rise in the fiscal deficit, and a dramatic surge in public...

In this study, during 2008, the financial crisis lead Iceland’s public debt to soar from under 30 percent of GDP to more than 100 percent of GDP, and while underlying external debt came down sharply, it remains elevated at close to 300 percent of GDP. First, external sustainability is...

The 2012 Article IV Consultation reports that Iceland’s fiscal consolidation is continuing, but at a slower pace. Moderate expenditure overruns materialized in 2011, which will partly spill over to 2012 and the medium term. A key priority is to put the medium-term fiscal path back on track,...

The ex-post evaluation of Iceland’s Exceptional Access under the 2008 Stand-By Arrangement is presented. In the wake of the global financial crisis in late 2008, Iceland has experienced a deep financial and economic crisis of its own. Domestically, the rapid increase in lending fuelled bubbles...

This technical assistance report on Iceland focuses on a new organic budget law (OBL). In designing a new OBL, it is important to preserve good features of Iceland’s current legal framework for budgeting. At the same time, any new OBL should address the key weaknesses in the Financial...

This paper reviews economic developments in Iceland during 1990–96. It analyzes the origins of the current economic expansion associated with a swing in the current account and in emerging inflation pressure. Three driving forces are emphasized: the positive supply shock affecting the...

This Selected Issues paper focuses on the European Monetary Union and the monetary policy framework in Iceland. It concludes that in terms of an exchange rate regime, the two most realistic options for Iceland are to continue with the existing arrangement or adopt a unilateral peg to the euro....

This paper reviews economic developments in Iceland during 1990–95. It describes developments in the real economy, and examines monetary and exchange rate developments and policies and the transmission of monetary policy. The paper provides a detailed look at budgetary outcomes and the stance...

The paper describes the impressive economic progress made by Iceland in implementing program policies, stabilizing the exchange rate, and bringing inflation down, under a program supported by a Stand-By Arrangement (SBA). The authorities noted that key challenges are to reduce the high level of...

This study focused on environmental tax measures, and on allocation, pricing, and taxation of Iceland’s major hydropower and geothermal resources. Measures to secure the tax base for the corporate income tax (CIT) are proposed. Taxation of the financial sector can be improved by a number of...