UPDATE: Iceland Gets $200M Long-term Loan From Poland

Iceland's Finance Ministry has signed an agreement with Poland to receive the equivalent of $200 million in long-term financing as part of its ongoing drive to prop up its struggling economy and shaky currency.

The loan of 630 million Polish zloty will be used to buy Polish Treasury bonds, which can in turn be sold by Iceland's central bank in the public market to raise funds if needed.

"The loan will buttress Iceland's liquid foreign exchange asset position and serve as a supplement to the $2.1 billion loan granted by the International Monetary Fund in support of Iceland's economic stabilization and reform program," the Polish and Icelandic ministries of finance said in a joint statement Sunday.

The funds come as Iceland struggles to obtain disbursements of additional loans promised by the IMF and several neighboring countries. The IMF has already paid out around $827 million from its loan package approved last autumn, while the Nordic countries have yet to disburse any of the $2.5 billion they have promised in aid.

The delay is largely due to an unclear picture of Iceland's $5.5 billion plan to reimburse the U.K. and Netherlands for money paid to depositors of failed Internet bank Icesave, the foreign arm of Iceland's Landsbanki Island hf.

The Polish loan, which comes with a 12-year maturity and a grace period of five years, will be disbursed in three equal tranches and are conditional upon the approval of the second, third and fourth IMF reviews of the island's economic progress.

The bonds will be issued by the Polish finance ministry in four selected series with maturity dates in October 2015, 2017 and 2019 and in September 2022. The annual interest margin is set at 2% until 2015 and 1.3% thereafter, and is due simultaneously with interest payments, the ministries said.

Iceland suffered a near meltdown last autumn as its three biggest banks representing 85% of the banking sector were toppled by $80 billion of debt, several times the country's GDP. Its three main banks were nationalized in rapid succession, causing capital markets to freeze up and its currency to freefall.

Since then, the economic situation has stabilized, although much remains to be done before normal conditions are restored.