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Norway to extend loan to cash-strapped Iceland

(Xinhua)
Updated: 2008-11-04 09:55

STOCKHOLM -- The Norwegian central bank Norges Bank announced Monday it would lend cash-strapped Iceland 500 million euros (about $640 million) and extend an existing finance agreement with Iceland through 2009 to help it pull itself out of financial crisis, according to reports reaching here from Oslo.

Norges Bank was willing to extend to the Icelandic central bank Sedlabanki a medium-term loan of 500 million euros with a maturity of up to five years on condition that the International Monetary Fund (IMF) approves a 2.1-billion-dollar loan later this week, the bank said in a statement.

The loan would require a state guarantee from the Norwegian government, it added.

So the Norwegian government would as soon as possible submit to the Norwegian parliament Storting a proposition with a proposal for granting a state guarantee for such a loan, Finance Minister of Norway Kristin Halvorsen said in a press release.

Norges Bank said it has also extended a swap facility worth 500 million euros to Sedlabanki.

In May 2008 Norges Bank and Sedlabanki agreed on a swap facility that gives Sedlabanki the right to acquire 500 million euros when and if the need arises. The agreement was set to mature in December 2008, but has been extended to December 2009.

Last month, Iceland signed a tentative deal with the IMF. But the North Atlantic nation needs a further $4 billion according to Prime Minister Geir Haarde.