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Nine years after the Global Financial Crisis devastated Iceland the tiny nation has decided to lift capital controls on companies, pension funds and individuals.

The changes will take effect tomorrow following an announcement by the government yesterday.

"It is very important, it's very good news for the Icelandic economy as a whole that we are taking the last step to remove currency controls," Finance Minister Benedikt Johannesson said.

The controls were imposed in 2008 to help stabilise the currency and economy after Iceland's three largest banks collapsed.

At the time of their demise Glitnir, Landsbanki and Kaupthing held assets 10 times larger than the entire Icelandic economy.

The restrictions have been wound back gradually over the past year while Iceland has also updated its rules on foreign exchange and mandated special reserve requirements for new foreign currency inflows.

Foreign investors have poured "hot money" into the country, attracted by a 5 percent interest rate, which remains higher than most of Europe.

The policy reversal signals the country's return to international financial markets but does not mean the nation of 330,000 is in the clear just yet.

The plunge in the currency helped fuel a tourist boom and there are now fears that the economy is at risk of overheating.

Around 1.8 million people visited Iceland last year, a 40 percent increase on 2015.

The surge as well as strong investment in housing helped the economy grow by 7.2 percent last year and that figure could be eclipsed in 2017 after the economy grew by 11.3 percent in the final quarter of 2016.

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