The krona has stabilised since interest rates were raised last year

The central bank of crisis-hit Iceland has cut its interest rate to 17%.

The rate cut is the first since Iceland agreed a $10bn financial aid package with the International Monetary Fund.

The Sedlabanki cut rates by one percentage point from 18%, where they had remained since October on the recommendation of the IMF.

Iceland's financial system collapsed in October under the weight of debt, leading to a currency crisis, rising unemployment and public protests.

Iceland's economy is forecast to shrink by almost 10% this year.

The country's currency, the krona, has stabilised since the October meltdown.

The central bank raised rates by six percentage points in October to the record high of 18%.