Moody's raises Iceland outlook after IMF loan approval

REYKJAVIK: Ratings agency Moody's improved its outlook on Iceland's debt from "negative" to "stable" on Friday, after the IMF approved a much-contested 160-million-dollar loan to the country, ending months of political bickering.

"The change of outlook was driven by the improvement in Iceland's external liquidity due to the restoration of financing from the IMF (International Monetary Fund) and Nordic governments," Moody's said in a statement.

The outlook change on Moody's evaluation of Iceland's debt, currently at Baa3, or the lowest level above "junk" status, reduced the likelihood of a downgrade.

The IMF agreed in November 2008 to lend Iceland up to 2.1 billion dollars in an effort to stave off economic collapse after all its major banks failed in the heat of the global financial crisis.

Wrangling with creditors -- chiefly the Netherlands and Britain -- had delayed the latest installment by three months.

The Washington-based fund's decision on April 16 to approve another installment, took lending to the Atlantic island to around 1.2 billion dollars.