Photo of Prime Minister Geir H. Haarde (photos@pmo.is)http://hugin.info/139841/R/1263214/277247.jpg

Reykjavik, Iceland - 24 October 2008 - The Icelandic Governmenthasreached an agreement ad referendum with a mission fromtheInternational Monetary Fund (IMF) on a comprehensivestabilisationprogram.

We have reached agreement ad referendum with a mission from theIMFon an economic stabilisation program that could be supported byastand-by arrangement with the fund. The mission will now returntoWashington to get approval of this program from the IMF'smanagement.We are confident that the IMF's management will support theprogramand submit it for approval by the IMF's excecutive board as soonaspossible. The economic program will be supported by an SDR1.4billion (USD 2 billion) loan under a two-year Stand-By-Arrangement.Iceland would be able to draw SDR 560 million (USD 830million)immediately after the Board approval. It is also expected thatanagreement with the IMF will encourage lending from other sources.

Economic Stabilisation Program Objectives:

The objectives of our program are as follows:

1. Restore confidence in the Icelandic economy and stabilisetheIcelandic krona through a comprehensive and strong macro-economicprogram;2. Restore fiscal sustainability and prepare astrongmedium-term fiscal consolidation program;3. Implement a sound banking strategy to re-establish aviablebanking system to support the Icelandic economy.

The short term stabilisation of the exchange rate is essentialinorder to get inflation under control and normalisebusinessconditions, particularly with regard to foreign trade. This willbeachieved by reintroducing a flexible exchange rate regime backedupby strong foreign currency reserves and the full commitment oftheCentral Bank of Iceland to apply the means necessary to getthedesired results. Given the relatively large depreciation thathasalready taken place, and the contraction in domestic demand whichisexpected, there is little doubt that following theinitialstabilisation period, a significant currency appreciation is tobeexpected. However, the exchange rate may show considerablevolatilityin the beginning, which the program is designed to address.

Another main objective of our program is to create soundfiscalstrategies given the extraordinary challenge that public financesinIceland are now facing as a result of the cost of bankrestructuringand the inevitable revenue loss as the economy slows down. Toobtainthe fiscal objectives there will be a need to limit thediscretionaryrelaxation in the current budget proposal and toimplementsignificant tightening of the structural balance in the mediumterm,which is a necessary precondition for a sustainable growth pathofthe Icelandic economy.

Finally, our program aims to facilitate the creation of asoundbanking system for Iceland by a series of reformsregardingoperational procedures as well as a revision of financialregulationin accordance with international best-practice. This willinclude,among other things, revised articles of bank insolvency as wellasgeneral insolvency rules.

Prime Minister Geir H. Haarde:"This program will enable us to secure funding and gain access tothenecessary technical expertise required to stabilise theIcelandickrona and to provide support for the development of ahealthierfinancial system. As a result, Iceland will commit to asustainablelong-term economic policy, and a plan for the recovery oftheIcelandic economy. A thorough review of the Icelandicbankingregulatory framework will also form part of this program," saidPrimeMinister Geir H. Haarde.

Prime Minister Geir H. Haarde added:"With our announcement today of our intention to cooperate withtheIMF, Iceland is now in a much better position to establish asoundeconomic and financial base for the country. We would like tothankall those who have assisted us in these dark days and we nowhavegrounds for a more optimistic view of the future."

Foreign Minister, Ingibjörg Sólrún Gísladóttir:"The Icelandic government has taken decisive measures and isworkinghard to solve the problems it is facing. We realize thattheimmediate future remains challenging due to the globalfinancialcrisis but I am convinced that international cooperationandsolidarity is essential for us to recover, reform and regainIcelandsgood reputation abroad. We are confident that the prospectivesupportof the IMF will provide the necessary impetus for some of ourfriendsand allies in the international system to contribute tothereconstruction of the Icelandic financial system", addedForeignMinister, Ingibjörg Sólrún Gísladóttir."

For more information:Greta Ingthórsdóttir, Political Advisor to the Prime Minister,tel:+354-545-8400 and e-mail: press@pmo.is. For more facts andinformation from the Government, please visit www.government.is

Urdur Gunnarsdottir, Press Officer, tel: +354-545-8950 and e-mail:press@mfa.is For more facts and information from the Government,please visit www.government.is andhttp://www.presspodium.com/info.jsp.

Note to editors:

Additional press and media service:To ensure transparency and satisfactory media service, a pressofficefunction has been established as part of the effort outlinedabove.The aim will be to ensure continued service to the domestic andinternational press. The mail address to the projects goingforwardwill be: press@pmo.is for press photos: photos@pmo.is. For morefactsand information from the Government, please visitwww.government.isand http://www.presspodium.com/info.jsp.

Background on Prime Minister Geir H. HaardeFor more facts about Geir H. Haarde, please see:http://eng.forsaetisraduneyti.is/minister/cv

Background about IcelandFor more background and facts about Iceland - please visitwww.government.is and www.icetourist.is/displayer.asp?cat_id=269.Forgeneral information about Iceland, please contact the IcelandChamberof Commerce, www.vi.is. The contact person is Finnur Oddson,ManagingDirector, e-mail: finnur@vi.is.

Iceland in short:Iceland is an island of 103.000 km2 (39,756 sq.miles), with only320.000 inhabitants, is about one-third larger than Scotland orIreland. Its highest peak, Hvannadalshnjúkur, rises to 2.119 m andover 11 per cent of the country is covered by glaciers, includingVatnajökull, the largest in Europe. Energy: Situated on theMid-Atlantic Ridge, Iceland is a hot spot of volcanic andgeothermalactivity: 30 post-glacial volcanoes have erupted in the past twocenturies, and natural hot water supplies much of the populationwithcheap, pollution-free heating. Rivers, too, are harnessed toprovideinexpensive hydroelectric power. People: Of the 320.000 citizen,morethan half live in the capital Reykjavík and its neighbouring townsinthe southwest. Keflavík International Airport is located about 50kmfrom the capital. Language: Iceland was settled by Nordic peopleinthe 9th century - tradition says that the first permanent settlerwasIngólfur Arnarson, a Norwegian Viking who made his home whereReykjavík now stands. The Icelanders still speak the language oftheVikings, although modern Icelandic has undergone changes ofpronunciation and, of course, of vocabulary! Iceland is alone inupholding another Norse tradtion, i.e. the custom of usingpatronymics rather than surnames; and Icelander's christian nameisfollowed by his or her father's name and the suffix -son or -dóttir,e.g. Guðrún Pétursdóttir (Guðrún, daughter of Pétur). Members of afamily can therefore have many different "surnames", whichsometimescauses confusion to foreigners! History: In 930, the Icelandicsettlers founded one of the world's first republican governments;theOld Commonwealth Age, described in the classic Icelandic Sagas,lasted until 1262, when Iceland lost its independence, and in 1944the present republic was founded. The country is governed by theAlthing (parliament), whose 63 members are elected every fouryears.four-yearly elections are also held for the presidency; PresidentÓlafur Ragnar Grímsson was elected in June 1996 to succeed VigdísFinnbogadóttir, and was re-elected in June 2000. The head ofstateplays no part in day-to-day politics. Economy: Iceland has all thecharacteristics of a modern welfare state. National income percapitawas somewhat above the EU average in 2007. Iceland has largelybuilton its comparative advantages in abundant marine and energyresourcesalthough the main driver of economic growth recently has beenservices with two-thirds of the working population employed in theservice sector, both public and private. Fish and other marineproducts were the mainstay of an export oriented economy untilearly2008, when exports of aluminium smelting products emerged as thelargest single export product accounting for 40% of total exportrevenue. Export of services such as tourism have also been growingand account for almost one-fifth of total export revenue. Icelandisa member of the European Fee Trade Association (EFTA) and theEuropean Economic Area (EEC). Health: Life expectancy, at 81.3yearsfor women and 76.4 for men, is one of the highest in the world,and acomprehensive state health-care system aims to keep it that way.

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For more information:Greta IngthórsdóttirPolitical Advisor to the Prime Ministertel: +354-545-8400e-mail: Email Contactwww.government.isUrdur GunnarsdottirPress Officertel: +354-545-8950e-mail: Email Contactwww.government.ishttp://www.presspodium.com/info.jsp