(Adds quotes on size of payment missed, budget measures)
By Patrick Lannin
REYKJAVIK, April 24 (Reuters) - Iceland's loan programme with the International Monetary Fund was delayed for a few weeks due to a change in government in January, but talks with lenders are on track, the finance minister said on Friday.
He said the country had missed a loan payment that was due in March, but did not see it as a serious problem. He also thought unemployment, at 8.9 percent in March, had levelled off.
Iceland is heading for an early election on Saturday, called by the caretaker left-of-centre government, which took office after the conservative government fell due to protests after it was blamed for helping cause the country's crisis.
The parties in the centre-left government, the Social Democrats and the Left-Greens, are expected to win a big victory in the vote, turning their minority coalition into a majority.
Finance Minister Steingrimur Sigfusson of the Left-Green Party, expected to keep the post after the election, told Reuters Financial Television the government hoped to wrap up work on budget cuts and revenue increases, part of the IMF-led economic programme, by the middle of the year.
"The whole programme was delayed and most of that delay was because of the change of government at the end of January," he said, referring to the fall of the conservative government and its replacement by a centre-left coalition.
He later said Iceland had missed a payment which was about a third or a quarter of the size of the first tranche of $800 million it received from the IMF.
"Since then the programme has been more or less on track and only a few weeks delay has been on our shift," he said. He hoped the Fund would approve a fresh tranche of lending in early May.
"We are in no trouble," he added, saying talks with Nordic central banks, Poland and Russia are also on track. "We hope to have this more or less finalised in May or June," he added.
The country last year agreed a $10 billion rescue, including $2.1 billion from the IMF.
Under the IMF programme, Iceland has to take measures to cut a budget deficit expected to balloon to double digits this year.
"We need to raise some taxes or get some income, but we also need (spending) cuts and to save as much as we can. If we are going to deal with it, it will be a mixed approach, we will try to get this from both sides," he said.
He said the government had said that it needed to find about 30-55 billion crowns ($229.6-$421 million) in austerity steps.
He said the government was making progress on restructuring the bank sector and finding out what the assets and liabilities are of the banks created from the crash of the old institutions.
"Actually we are hopeful that it will cost less than was predicted to recapitalise the banking sector," Sigfusson said.
The IMF has said the cost to the budget of capitalising the new banks was set to be 26 percent of GDP, with an estimated capital injection of 385 billion crowns ($2.95 billion). (Editing by Stephen Nisbet)