Iceland - Money

In light of the recent depreciation of the króna and the threat of high inflation for 2001, the Central Bank of Iceland will likely continue its conservative fiscal policy in 2001-02 to tighten the money supply and lower domestic demand for goods and services. Inflation has eased slightly as a result, although it was recorded at a high 4.6 percent in November 2000 as Iceland's economy over-heated.

Exchange rates: Iceland
Icelandic kronur (IKr) per US$1
Jan 2001	84.810
2000	78.676
1999	72.335
1998	70.958
1997	70.904
1996	66.500
SOURCE: CIA World Factbook 2001 [ONLINE].

The Central Bank announced in March of 2001 that its desired inflation target was under 3 percent, and that it would take action when inflation deviated substantially from that figure.

Public finances are in good shape due to the government's conservative fiscal policies and debt consolidation, which it started in 2000. The government has implemented its program in response to the recent signals of economic troubles, which were caused by high inflation and a growing budgetary deficit.

Privatization and mergers between large private companies continued in 2001. In October of 2000, the government permitted the merger of 2 of the biggest Icelandic banks: the National Bank of Iceland and Agricultural Bank of Iceland. In May of 2000 the country's largest investment and corporate bank, Icelandic Investment Bank (FBA), merged with a leader in retail banking, Islandsbanki, creating IslandsbankiFBA.