IMF: Iceland capital controls to remain through 2015

Icelandic authorities will need to keep capital controls in place through 2015, officials from the International Monetary Fund said. The agency said in a statement, “It’s now assumed that capital controls will remain in place through 2015 because of the limited progress made so far in reducing the stock of offshore krona.”

The scheme was put in place following the 2008 collapse of Landsbanki Islands hf, Glitnir Bank hf and Kaupthing Bank hf in the effort of relieving pressure from the Icelandic krona via a number of incentives.

But earlier this year, Iceland’s central bank announced that it was aiming to remove the measures by 2015 amid the North Atlantic nation’s ongoing recovery via dual currency auctions combining the krona with the euro. However, the move has only produced “modest” results, IMF officials said in the report.

The Washington-based organisation added, “One precondition for liberalisation is reducing the overhang of liquid offshore krona. This process needs to be accelerated by improving incentives for offshore krona holders to exit via the channels in the authorities’ capital account liberalisation strategy.”