Iceland and the International Monetary Fund Intent. The conditionalities include details of Banking Sector restructuring, changes to Fiscal Policy including government austerity and changes to exchange rate policies. Following the global financial crisis in 2007-2008 Iceland's banking sector collapsed leading to wide ranging unemployment and a lessening of support for the Icelandic currency - the Icelandic Krona ISK. This was triggered by an insolvency of the private banking sector. The largest Icelandic banks had liabilities in excess of 80 percent of GDP . Iceland requested assistance from the IMF and from its Nordic partners in the Nordic Council. The goal of Iceland in this market intervention
Iceland and the International Monetary Fund reforms the authority of the FME was increased to improve the stability of the Icelandic banking sector and enforce the introduced measures. Along with regulatory and banking changes, fiscal policy was also modified to respond the the shock in the following ways. The assumption of the banking sector debt by the Bank of Iceland was one of the initial measures acted upon. As a consequence the public debt increased from 29% in 2007 to 105% of GDP by 2009. To cope with the increased debt burden the Icelandic government adopted a medium term debt reduction plan; the structural balance be