Iceland's economics minister said on Sunday he was hopeful that a review by the International Monetary Fund (IMF) could be completed within weeks, potentially releasing crucial aid for the crisis-hit nation.

Gylfi Magnusson and Finance Minister Steingrimur Sigfusson met IMF Managing Director Dominique Strauss-Kahn last week in Washington to discuss delays to the aid program as a result of a row over Iceland's Icesave debts to Britain and the Netherlands.

We have had fruitful discussions with Fund representatives about positive signs of economic progress in Iceland and how we can ensure that the fund's next review of performance under the economic program will not be delayed any further, Magnusson said in a statement.

The IMF agreed loans of more than $2 billion to Iceland after the North Atlantic island nation's main banks went under in 2008, leading to a collapse in the currency and a deep recession.

Initial payments under the IMF scheme were made, but an impasse over the terms under which Iceland is to repay about $5 billion to Britain and the Netherlands for compensating overseas savers who lost money in Icelandic accounts has delayed further aid.

Magnusson recognized that Iceland would need to find a solution which took into account the status of bilateral talks with the British and Dutch governments as well as conditions set by its Nordic neighbors, who have also promised aid.

I am however very hopeful that this can be solved and the next review can take place within a few weeks, he said.

The second review of Iceland's IMF program had initially been set for late January, but was postponed after efforts to strike a deal over the country's debts hit a snag.

Iceland needs the aid so it can start to lift capital controls, regain access to international markets and get its economy back on a normal footing. It hopes it can persuade the IMF and other lenders to let funds flow again even if a deal on Icesave is not in hand.

(Reporting by Omar Valdimarsson via Stockholm Newsroom, editing by Tim Pearce)

United kingdom Iceland United nations International Monetary Fund