Reykjavik  - The government of Iceland said Friday it has reached an agreement with a visiting team from the International Monetary Fund (IMF) for a 2-billion-dollar economic rescue plan.

The IMF team was to return to Washington to seek approval from the IMF's management, the government said. If approved, Reykjavik could immediately draw on 830 million dollars under the two-year arrangement.

"This programme will enable us to secure funding and gain access to the necessary technical expertise required to stabilize the Icelandic krona and to provide support for the development of a healthier financial system," Prime Minister Geir Haarde said.

Under the terms of the agreement, Iceland was to "commit to a sustainable long-term economic policy, and a plan for the recovery of the Icelandic economy," he said.

An agreement with the IMF will likely pave the way for loans from other sources.

Foreign Minister Ingibjorg Solrun Gisladottir said the pending IMF agreement "will provide the necessary impetus for some of our friends and allies in the international system to contribute to the reconstruction of the Icelandic financial system."

Earlier this week, reports suggested loans could also be forthcoming from Japan, as well as from Iceland's Nordic neighbours.

Haarde said the agreement with the IMF was not tied to a settlement with the British government over British savers' deposits in a collapsed Icelandic internet bank.

London and Reykjavik have been at odds over the repayment of the deposits.

The economy of the North Atlantic nation of some 300,000 people has come under severe strain amid the global credit crunch.

Iceland on Thursday received a delegation from neighbouring Norway. On Friday, Norwegian Foreign Minister Jonas Gahr Store said he was to visit Iceland next month.

The central bank of Iceland recently drew 400 million euros (543 million dollars) from the central banks of Denmark and Norway. This was in accordance with a May agreement it made with the central banks of Sweden, Norway and Denmark. (dpa)