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IMF acknowledges Croatia's reforms and fiscal stability - finance minister

WASHINGTON, Sept 26 (Hina) - The International Monetary Fundacknowledges Croatia's economic reforms and fiscal stability andaccepts Croatia's budgetary deficit of 4.2 percent in 2005 and 3.5percent in 2006, Croatian Finance Minister Ivan Suker said inWashington on Sunday.
WASHINGTON, Sept 26 (Hina) - The International Monetary Fund acknowledges Croatia's economic reforms and fiscal stability and accepts Croatia's budgetary deficit of 4.2 percent in 2005 and 3.5 percent in 2006, Croatian Finance Minister Ivan Suker said in Washington on Sunday.

Minister Suker and Croatian National Bank governor Zeljko Rohatinski were taking part in the annual conference of the IMF and the World Bank.

The two officials held a number of meetings with IMF officials at which they discussed Croatia's stand-by arrangement and its recent first positive review.

Speaking to Croatian reporters after meeting the head of the IMF department for Europe, Michael Deppler, Suker said the IMF accepted Croatia's budgetary deficit of 4.2 percent of GDP in 2005 and its projected budgetary deficit of 3.5 of GDP in 2006.

IMF leaders are completely satisfied with Croatia's fiscal adjustments in the past year since when the stand-by arrangement was agreed. They also fully agree to accept and support our projected deficit of 3.5 percent in 2006, Suker said.

Suker said that all macroeconomic indicators and the filling of the budget in the first nine months this year indicated that, unless something unexpected happened, Croatia would have a deficit of 4.2 percent in 2005.

Croatia has managed to achieve what many did not believe - it has reduced its deficit from 6.3 percent in 2003 to 4.2 percent in 2005 and projected its deficit in 2006 at 3.5 percent, Suker said.

Governor Rohatinski said the IMF understood that Croatia would not manage to keep its external debt at 82 percent of GDP in 2005, but that the debt would increase to 83.4 percent due to the increase in oil prices which Croatia could not influence.

Suker said the IMF was satisfied with Croatia having contained its external debt. If the project of privatisation of the INA oil company is completed by the end of this year, that will be the first time Croatia has reduced its foreign debt in one year, he added.

Rohatinski said a positive trend in the structure of the foreign debt was a reduction in the share of the state in the foreign debt following the state's reorientation to domestic borrowing, as well as reduction in the share of business banks, which is seen as a result of measures taken by the HNB in 2005.

The Croatian delegation also had a number of meetings with World Bank officials, including Executive Director Ad Melkert and Vice-President for Europe and Central Asia Shigeo Katsu, with whom they discussed the World Bank's future projects in Croatia.

Suker spoke about a project of adjustment of Croatia's agricultural legislation to the EU legislation to facilitate the use of the SAPARD pre-accession programme and a project of construction of water and sanitation infrastructures in the Sava and Drava river valleys.

The two sides also discussed the possibility for the World Bank to grant business banks guarantees for certain projects in Croatia.

Suker told reporters that he had also met Michael Klein, a World Bank Vice-President and main author of a recent controversial report on the investment climate, which ranked Croatia 118th among 155 countries.

"We agreed that Croatia has carried out a number of reforms in the past seven to eight months and that now it would be ranked much higher than in the report," Suker said.

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