MOSCOW, Oct 14 (Reuters) - Russia has denied Iceland's request for a loan as it needs to keep a lid on government spending in the face of budget deficits, the Russian Finance Ministry said in a statement on Wednesday.
Iceland, reeling from a collapse of its heavily exposed banking sector, asked for a loan from Russia last October.
'Based on the results of considering the Icelandic government's request for financial aid ... of up to $500 million, the Russian government took the decision to refrain from giving the requested funds,' the statement said.
'The decision was dictated by the necessity to restrain the growth of state spending in the conditions of a budget deficit.'
Iceland's finance minister Steingrimur Sigfusson told state radio the decision had been made clear during meetings with his Russian counterpart in Istanbul at last week's annual meeting of the International Monetary Fund (IMF).
'This does not make much difference. We have secured the loans we need and are, in fact, reevaluating our needs,' he said.
Iceland began loan talks with Russia after the collapse of its main banks and currency last year as it sought to round up funds to bolster its currency reserves enough to allow the loosening of strict currency controls adopted due to the crisis.
Since then, it has struck a deal for a $10 billion bailout led by the IMF and its European neighbours. However, difficulties in reaching an agreement on reimbursing Britain and the Netherlands for savings lost in Icelandic accounts has held up payments in recent months.
Icelandic officials, who declined to be identified since they were not authorised to make official comments on the matter, said there had been little hope Russia would provide any loans since talks had dragged on for a year.
Officials also said that in light of the IMF package, loans from Russia were not essential for returning the Icelandic economy to something resembling normal footing.
Iceland originally mentioned 4 billion euros ($5.96 billion) as a possible loan amount from Russia, but Moscow subsequently said that was too much, later mentioning $500 million as a potential sum.
Since the first loan request, Russia's own economy has slipped into its first recession in a decade while a third of its gold and currency reserves has been spent on controlling the depreciation of the rouble.
(Reporting by Toni Vorobyova in Moscow and Niklas Pollard in Stockholm; Additional reporting by Omar Valdimarsson in Reykjavik, Editing by Andy Bruce and Chizu Nomiyama) ($1=.6710 Euro) Keywords: RUSSIA ICELAND/ (antonina.vorobyova@reuters.com; Tel: +7495 7751242, Reuters Messaging: antonina.vorobyova.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Iceland, reeling from a collapse of its heavily exposed banking sector, asked for a loan from Russia last October.
'Based on the results of considering the Icelandic government's request for financial aid ... of up to $500 million, the Russian government took the decision to refrain from giving the requested funds,' the statement said.
'The decision was dictated by the necessity to restrain the growth of state spending in the conditions of a budget deficit.'
Iceland's finance minister Steingrimur Sigfusson told state radio the decision had been made clear during meetings with his Russian counterpart in Istanbul at last week's annual meeting of the International Monetary Fund (IMF).
'This does not make much difference. We have secured the loans we need and are, in fact, reevaluating our needs,' he said.
Iceland began loan talks with Russia after the collapse of its main banks and currency last year as it sought to round up funds to bolster its currency reserves enough to allow the loosening of strict currency controls adopted due to the crisis.
Since then, it has struck a deal for a $10 billion bailout led by the IMF and its European neighbours. However, difficulties in reaching an agreement on reimbursing Britain and the Netherlands for savings lost in Icelandic accounts has held up payments in recent months.
Icelandic officials, who declined to be identified since they were not authorised to make official comments on the matter, said there had been little hope Russia would provide any loans since talks had dragged on for a year.
Officials also said that in light of the IMF package, loans from Russia were not essential for returning the Icelandic economy to something resembling normal footing.
Iceland originally mentioned 4 billion euros ($5.96 billion) as a possible loan amount from Russia, but Moscow subsequently said that was too much, later mentioning $500 million as a potential sum.
Since the first loan request, Russia's own economy has slipped into its first recession in a decade while a third of its gold and currency reserves has been spent on controlling the depreciation of the rouble.
(Reporting by Toni Vorobyova in Moscow and Niklas Pollard in Stockholm; Additional reporting by Omar Valdimarsson in Reykjavik, Editing by Andy Bruce and Chizu Nomiyama) ($1=.6710 Euro) Keywords: RUSSIA ICELAND/ (antonina.vorobyova@reuters.com; Tel: +7495 7751242, Reuters Messaging: antonina.vorobyova.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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