Lánamál ríkisins - Company Announcement

Repayment of Treasury and Central Bank debt

In March, the Treasury of Iceland and the Central Bank of Iceland will prepay
loans from the International Monetary Fund (IMF) and the Nordic countries in
the amount of 116 b.kr. 

The transaction represents the prepayment of SDR 289 million (the equivalent of
55.6 b.kr.) to the IMF, and 366 million euros (the equivalent of 60.5 b.kr.) to
the Nordic countries. 

The prepayment amounts to just over 20% of the funding from the IMF and the
Nordic countries in connection with the IMF-led Stand-By Arrangement. 

Today's transaction is an element in paying down short-term debt, thus reducing
the expense associated with the holding of the Central Bank's foreign exchange
reserves without increasing refinancing risk or depleting the reserves. 

The decision to make the payment was made in view of the Treasury and the
Central Bank's relatively strong foreign currency liquidity position in the
near term. The repayment to the IMF covers maturities in 2013, and the payments
to the Nordic countries cover maturities coming due in 2014 and 2015, as well
as a portion of 2016 maturities. 

The original loans from the IMF and the Nordic countries amounted to 3.4
billion euros, or 564 b.kr. at the current exchange rate. The prepayment does
not affect the Treasury's net debt, but it reduces Treasury´s gross debt by
approximately 3.4% of GDP. Iceland's external liabilities decline overall by
about 6.6% of GDP as a result of these changes, but the net debt position is
unchanged. 

The maturity profile of Treasury and Central Bank foreign debt, which can be
seen below, shows clearly that the prepayment significantly reduces the burden
of foreign debt service over the next four years, or until 2016. 

Further information can be obtained from Már Guðmundsson, Governor of the
Central Bank of Iceland, at tel: +354 569-9600.

Attachments:

Repayment of debt.pdf