January 5, 2010 / 10:05 PM / 10 years ago

UPDATE 1-IMF says Icesave not condition of Iceland program

(Adds details from IMF statement)

WASHINGTON, Jan 5 (Reuters) - The International Monetary Fund said on Tuesday the Icesave bank compensation deal was not a condition of Iceland’s IMF loan program as long as other lenders continued to finance part of the $10 billion program.

The IMF statement was prompted by a decision on Tuesday by Iceland’s President Olafur Grimsson not to sign a bill into law that would authorize the payment of more than $5 billion to British and Dutch savers who lost fund when Icesave collapsed during the financial crisis last year.

Grimsson’s decision will force a referendum on the issue although opinion polls show almost 70 percent of voters oppose the bill. Prime Minister Johanna Sigurdardottir said her government would honor Iceland’s debts.

Finnish officials said the president’s actions could delay the next tranche of a $2.60 billion loan from Nordic countries, part of the $10 billion IMF-led rescue package for Iceland.

The IMF said it would discuss the situation with Icelandic authorities while continuing to help the country implement economic policies to fix its crisis-hit economy.

“The IMF will evaluate the situation with the Icelandic authorities and consult with the other countries providing financing for the program.” IMF mission chief to Iceland Mark Flanagan said in the statement. (Reporting by Lesley Wroughton; Editing by Diane Craft)

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