Economic statistics - 01.02.1995, Blaðsíða 5

eign debt and purchases of foreign securities led to
a significant outflow of capital and a deterioration of
the foreign reserves of the Central Bank.
The increase in the current account surplus from
the previous year was due to strong export growth.
Exports of goods and services rose by 15.6% in
terms of lcelandic krónur.
The capital account deficit in 1994 amounted to
25.2 b.kr. Net capital outflow due to securities
transactions amounted to 7.5 b.kr. New foreign bor-
rowing amounted to 32.7 b.kr. whereas repayments
amounted to 40.1 b.kr. Outflow of short-term capi-
tal amounted to 10.2 b.kr., mainiy due to repay-
ments of foreign short-term debt of deposit money
banks and improving external liquidity.
The net external assets of the Central Bank
declined by 14 b.kr. in 1994 from an unusually high
level at the end of 1993 and amounted to 15 b.kr.
at the end of the year. The gross foreign currency
reserves of the Centrai Bank amounted to 20.3
News
Liberalisation of capital movements
As of the beginning of 1995 all restrictions on short-
term capital movements were aboiished. As of 1
January 1994, all restrictions on foreign invest-
ments in long-term securities by residents were
removed, except for certain conditions regarding
intermediation and custody. At that time there were
no restrictions on investments by non-residents in
long-term domestic bonds. Investments in short-
term securities both inward and outward were per-
mitted last year with ceilings, which were abolished
on 1 January 1995. The change at the beginning of
1995 was the final step in the gradual liberalisation
of external capital movements that has been an
ongoing process since the autumn of 1990. The
regime on external capital movements in lceland is
now in full accord with the EEA agreement and the
regime in EU-countries.
Credit ratings unchanged
Moody's Investors Service confirmed its credit
rating of The Republic of lceland in the institution's
report from December 1994. It rates the long-term
foreign currency debt of lceland at A2 "on the basis
of the country’s very high per capita income, its
long history of political stability and its effective
management of a narrow resource base." Iceland's
short-term rating is unchanged as P-1 rating.
New definition of reserves
In table V.6 on page 13 the definition of the for-
eign exchange reserves has been changed in
accordance with the standards of the International
Monetary Fund. Now the reserves consist of assets
in foreign currency which are under the control of
Batance of payments and external debt position
Percentages of GDP 1992 1993 1994
Trade balance 0.0 3.0 4.7
Services balance ....-3.0 -2.9 -2.4
Investment income, net... ....-3.4 -3.5 -3.5
Other services, net 0.4 0.6 1.1
Current account balance ....-3.0 0.1 2.3
Capital account 4.1 -1.3 -5.8
Overall balance 1.1 -1.4 -3.2
Net external debt ...47.7 54.0 53.5
b.kr. at the end of 1994 which corresponds to three
months worth of general merchandise imports.
Foreign funded national debt amounted to 256
b.kr. at the end of 1994, but the net external debt,
i.e., long-term and short-term debt iess foreign cap-
ital assets, is estimated to have declined from 239
b.kr. at the end of 1993 to 230 b.kr. at the end of
1994.
items
and accessible for the monetary authorities in order
to finance a deficit in the balance of payments or in
order to act in the foreign exchange market to affect
exchange rates. Therefore, foreign assets denomi-
nated in lcelandic krónur amounting to 4 b.kr. are
not counted as a reserve, and the reserves are
adjusted by that amount.
Bond issue in the European market
The Republic of lceland came out with an 15 bil-
lion Japanese yen bond issue in the European mar-
ket on 11 January 1995. The bonds carry an inter-
est rate of 4.9% and will have a maturity of 10
years.
Central Bank raises interest rates
The Central Bank of lceland has raised its inter-
est rates four times since November 1994. The dis-
count rate has been raised from 4.4% to 5.5% The
yield in repurchasement agreements (Treasury bills
- bid) has been raised from 5.2% to 6.3%. The
Central Bank's bid for 3 month bills in the money
market has been raised from 5.25% at the end of
November 1994 to 6.9% at the end of January
1995. The Central Bank's bid for 5-year govern-
ment bonds is unchanged, 5.05%.
The reasons behind this rise in short-term inter-
est rates are higher interest rates in foreign mar-
kets, the abolishment of restrictions on foreign
exchange transactions and rising interest rates in
money and bond markets in lceland. On 22
February, the nominal yield on 3 month Treasury
bills in the money market was 7.1% in lceland com-
pared to 5.8% in Denmark, 6.7% in the UK and
8.0% in Sweden.