Iceland to tighten capital controls to boost crown

REYKJAVIK, March 31 (Reuters) - Iceland’s interim government on Tuesday tabled new rules to force the island’s exporters to repatriate foreign currency in a move to support the crown.

Finance Minister Steingrimur Sigfusson told parliament, there were strong indications that capital controls brought in last year to bolster the currency were not working sufficiently, hindering the build-up of Iceland’s foreign reserves.

“These measures are urgent and absolutely necessary,” Sigfusson told parliament.

“The current situation is unacceptable, not only because of its impact on our currency but also because this skews the competitiveness of the market.”

Sigfusson said the weakening of the crown over the last two weeks indicated some exporters were avoiding bringing home currency generated abroad, seriously undermining the central bank’s capital controls.

The new rules would be in force until end of November 2020 and were expected to be passed by the opening of business on Wednesday morning, Sigfusson said.

Iceland’s main banking groups collapsed late last year as the global credit crunch left them unable to repay huge debts taken on to finance rapid overseas expansion.

The banks brought the financial system down with them and sent the crown currency spiralling lower. The island of just 320,000 people was forced to go to the International Monetary Fund for help, agreeing a $10 billion financial aid package with the lender, Nordic countries and others.

A stable crown is seen as key to economic recovery. (Reporting by Omar Valdimarsson via Stockholm newsroom; Editing by Jon Boyle)