Iceland repays debts to Poland

Polish Finance Minister Mateusz Szczurek, his Icelandic counterpart Bjarni Benediktsson and the Governor of Iceland’s Central Bank, Sigmundur Gunnlaugsson, signed an amendment to the original loan agreement authorising the early repayment.

Szczurek told the PAP news agency just before his trip to Reykjavik, “Today we will sign an agreement ending our fruitful cooperation, which had helped to put Iceland on the path to recovery.

“Given the scale and depth of the crisis this is quite a success for the Icelandic economy. PLN 210 million will be returned this week.”

In 2009 Poland offered to loan Iceland up to PLN 630 million (EUR 153 million at current rates) following the collapse of that country’s banking sector and its request for international assistance. Of this PLN 210 million was borrowed by Iceland.

The money was used by Iceland to buy Polish government securities, which increased the Icelandic Central Bank’s reserves.

Szczurek explained, “Poland in 2009 showed that despite the global financial crisis the country was in a good [economic] condition, that it was able to lend to countries experiencing financial difficulties and did not itself need this support.”

Iceland’s economy has recovered sufficiently to allow the country to repay some of its debts. At the end of last year Iceland repaid 20 percent of money owed to the International Monetary Fund, while this March its government made a request to pay off the Polish debt ahead of schedule.

The loan has resulted in a small profit for the Polish government, of around PLN 20 million (EUR 4.9 million), though Szczurek stressed that this had not been a major motivation behind the loan offer. (sl/jb)