Iceland's minister of the interior has supported a suggestion that the National Church of Iceland should be financially compensated for the cutbacks it faced after the 2008 economic crash.

The proposed refund would see the church receive 660 million ISK (3.34 million GBP, 5 million dollars), the Iceland Review Online reports.

Last week Prime Minister Sigmundur Davíð Gunnlaugsson praised the church for its tolerance and sacrifice in recent years, adding that its funding should be increased.

Interior minister Ólöf Nordal added her support to initiative in an interview with Icelandic news outlet RÚV.

"The government discussed it briefly last autumn and stated its clear intent that the church's needs be met," she said.

Nordal, who was appointed minister of the interior in December 2014, said: "I absolutely agree with the PM that it's important to show special consideration for the church at this point in time."

When she was asked why the church should be prioritised over other institutions, she added: "It's a very important institution in society. There is no doubt about that. And I have very positive feelings towards the church."

The National Church, also known as the Evangelical Church of Iceland, has about 244,000 members and represents about 75 per cent of the country's 326,000 population.

The church is the only religious organisation to receive direct financial contributions from the state, but in 2009 this funding was temporarily suspended as the government had to make cuts in response to the financial crisis.

According to the English-language magazine the Reykjavík Grapevine, the son of the Bishop of Iceland works as an economic advisor to the prime minister.

Gunnlaugsson did not cite a source when he said he had become aware of the church's financial needs in an interview with RÚV, the Reykjavík Grapevine reports.