Iceland plans to ease financial restrictions for residents

The Icelandic finance ministry has unveiled draft legislation that would allow Icelanders to buy property overseas and expand their right to purchase foreign currency in cash "significantly". Drafted with the approval of the International Monetary Fund (IMF), the bill is due to be presented to parliament this week, and is expected to be approved.

"Important steps are being taken to lift the capital controls in full," a ministry statement said, setting out details of the draft law.

"With the measures provided for in the bill, the capital controls should not place substantial restrictions on most individuals, and by the turn of the year, only a very few individuals should be affected."

The proposed changes are aimed at dismantling controls for the country's 330,000 residents rather than benefitting foreign investors. Iceland had introduced capital controls at the onset of the recession to prevent a capital flight after the failure of three Icelandic banks.

Leadership test ahead of elections

The gradual easing of restrictions imposed by the 2008 global crisis was one of the main successes of the center-right government, which has been in power since 2013. The planned lifting of capital controls comes as the economy is expected to grow more than 4 percent this year while key interest rates remain at 5.75 percent.

Prime Minister Sigurdur Ingi Johannsson aims to complete the measures ahead of early legislative elections scheduled for October 29. He remains unpopular with many voters due to his perceived closeness to business.

Johannsson was appointed to the post of acting prime minister following the resignation of his predecessor Sigmundur David Gunnlaugsson in the fallout from the so-called Panama Papers, which revealed that hundreds of Icelanders held interests in tax havens.

ss/kl (AFP, Reuters)