Iceland joined the International Monetary Fund on Dec 27th 1945,[1] becoming one of the IMF's founding members.
Following the 2007–2008 financial crisis, Iceland's banking sector collapsed, leading to widespread unemployment.
Following thereafter, three of Iceland's major banks: Kaupthing, Landsbanki and Glitnir were unable to refinance their short term debts.
Measures were also introduced to increase the minimum capital adequacy ratio of the banks to 10% as a part of the effort to re establish confidence in the economy.
[5] As a part of these reforms the authority of the FME was increased to improve the stability of the Icelandic banking sector and enforce the introduced measures.
[5] One of the primary objectives of the Icelandic government in seeking an IMF programme was to stabilize the ISK and to set a path for its gradual appreciation.
[9] To stabilize short term pressures on the ISK the Central Bank of Iceland raised interest rates to 18%[10] and prepared to back the krona with its foreign reserves, specifically for which Iceland asked for an IMF programme.
The trade deficit arose from strong consumption and business investment, especially evident in the procurement of aircraft, petrochemical aviation products[9][12] and agricultural and consumer goods.