Iceland has secured the additional funding of $3 billion from Denmark, Finland, Norway, Sweden, Russia and Poland, the government said in a statement.

In addition, the Faroe Islands agreed to loan Iceland $50 million.

The government said $827 million of the IMF loan would be available immediately with the rest of the loan doled out in eight quarterly installments of $155 million each, pending quarterly reviews.

Iceland is to begin repayment in 2012 and complete repayment in 2015.

Iceland said it will use the funds to float the Icelandic krona. "It is to be expected that the currency market will stabilize soon and that international money transfers will subsequently return to normal," the statement said.

Icelandic Prime Minister Geir Haarde said the IMF loan was "an important step toward the rebuilding of our economy."

"With the IMF agreement in place, we can commence our recovery program with full force," he said.