Icelandic pension funds are to hold off on foreign exchange purchases over the next few months to support the economic and financial system as it tackles COVID-19 and its wider effects, after a declaration from the country’s pension sector association.

The Icelandic Pension Funds Association (Landssamtök lífeyrissjóða, LL) has published a national declaration for pension funds, in which it exhorted funds to limit their foreign exchange purchases over the next three months.

Following a meeting with the governor of the Central Bank of Iceland about the crisis on Tuesday to discuss the current uncertainty in the island country’s economy, LL’s chair Guðrún Hafsteinsdóttir penned the declaration the same day.

Hafsteinsdóttir wrote: “The large current account surplus in recent years has given pension funds scope to invest abroad and achieve risk diversification in their portfolio.

“Given that the country’s export revenues are projected to decline temporarily, the Icelandic Pension Funds Association considers it normal that pension funds will not buy foreign currency in the coming months,” she said.

The pension funds were owned by the public, she said, and it was important that they showed a high level of social responsibility when it came to investments and responses in Icelandic society during times of uncertainty.

After Tuesday’s meeting with the governor of the central bank, Hafsteinsdóttir said the organisation wanted to send encouragement to all the country’s pension funds to limit foreign exchange purchases over the next three months.

“It is important that the funds contribute to supporting Icelandic society and thus promote stability when times are tough,” she wrote.

Wednesday, the Central Bank of Iceland’s monetary policy committee cut interest rates by half a percentage point, bringing its key interest rate down to 1.75%.

It justified the further easing of its monetary stance with “the continued deterioration in the economic outlook following the accelerated spread of COVID-19 and the broad-based actions taken by Iceland and other countries in an attempt to slow the spread of the virus.