IMF APPROVES 146-MILLION STAND-BY ARRANGEMENT TO CROATIA

WASHINGTON, Feb 4 (Hina) - The International Monetary Fund's executive committee on Monday gave the green light to Croatia's request for a 14-month stand-by arrangement, worth 105.9 million of special drawing rights (approximately 146 million US dollars), the purpose of which is to support the Croatian economic and financial programme until April 2004. #L# The Croatian government plans to treat this arrangement as a precautionary measure and does not intend to use funds from the loan. The IMF director's first deputy, Anne Krueger, commended Zagreb for the adoption of the 2003 economic programme, which is focused on the fiscal consolidation and structural reform with an emphasis put on the stabilisation of the ratio between the public dept and gross domestic product, a flexible labour market and progress in privatisation. The programme has laid foundations for fiscal viability and viable high rates of the economic growth, but fiscal adjustments and structural reforms should be carried out in the coming years, Krueger said. She advised Croatian authorities to cut deficit in the public spending and prevent a rise in the amount of all collateral the government gave for debts so that the ratio between the public debt and GDP might stabilise. The planned cut in the public deficit considerably depends on the implementation of the wage policy and cuts in the number of employees in the defence sector, the IMF official said. Krueger added that the new criteria for the extension of the state guarantees for debts in 2003 should be strictly implemented. She said the Croatian National Bank should allow greater flexibility in the exchange rate of the national currency, and continue supervising the banking system so that decisions on loans could be sound. (hina) ms