(Adds details, background)
* Curbs on capital inflows lifted effective next week
* Bank sector restructuring to be complete end-November
* Nordic aid disbursement imminent
By Sebastian Tong
LONDON, Oct 30 (Reuters) - Curbs on capital inflows into Iceland will be lifted next week as it prepares to receive disbursements from international lenders including the International Monetary Fund (IMF) and Nordic countries, the country's economic affairs minister said on Friday.
Gylfi Magnusson also said the restructuring of the banking system was near an end, a year after its collapse knocked the island nation's economy into recession.
"The first stage (of the lifting of capital controls) will be announced today or tomorrow and that will be the freeing of all inflow of capital...the next stage will be the gradual lifting of restrictions on the outflow," Magnusson told reporters in London.
Magnusson said the government had no specific dates for the easing of restrictions on outflows as this would depend on external economic conditions, the extent of new capital inflows as well as currency reserve levels of the central bank.
Capital controls were introduced by Reykjavik a year ago to stem the outflow of capital with the collapse of Iceland's crown currency, which has since shed about half its value. Vital to the easing of capital controls has been securing financing from its international lenders but an international dispute over what to do with foreign savers who lost money when three of Iceland's largest banks collapsed in October 2008 had held up the IMF's $2.2 billion loan programme.
But on Wednesday the IMF approved a first review of the country's economic performance under the programme, paving the way for the disbursement of a $167.5 million loan tranche.
"IMF resources were needed to do this in an orderly manner," he said, adding that he expected the first installment of a $2.5 billion loan package from Denmark, Norway and Sweden soon.
An additional three disbursements would follow from December, he said, in tandem with subsequent IMF progress reports.
FULLY FUNCTIONAL
Magnusson said the restructuring of the country's banks was near completion and a banking system "fully functional in every respect and ready to do its part" in Iceland's economic recovery would be in place by the end of November.
Iceland's three largest banks -- Glitnir, Landsbanki and Kaupthing -- folded within a week last October, owing more than $60 billion to foreign creditors.
Magnusson said the majority of the banking system would held privately but the government would retain a stake in the restructured lenders.
"There will be conditions to allow the banks to grow but they will be more tightly controlled than previously," he said, adding that bank capital requirements would be higher than international requirements.
Magnusson said regulators will work to prevent a repeat of the build-up of foreign currency lending by banks to Icelandic household.
Many of the 320,000 people in Iceland have mortgages, car loans and other debts in foreign currencies such as the Swiss franc and Japanese yen.
The government has forecast an 8.4 percent contraction in the gross domestic product this year but Magnusson said Iceland could see its economy expand again in the second or third quarters next year before returning to annual growth from 2011 onwards.
"There is enormous uncertainty but...(GDP) in 2010 as a whole could come out to around zero," he said.
The Icelandic crown was up 0.89 percent against the dollar and 0.11 firmer against the euro at 1550 GMT. (Additional reporting by Sujata Rao; Editing by Andy Bruce)