IMF OFFICIAL EXPECTS SUCCESSFUL COMPLETION OF CROATIA'S STAND-BY ARRANGEMENT

ZAGREB, Feb 15 (Hina) - Hans Flickenschild, head of an International Monetary Fund (IMF) mission which visited Croatia between 6 and 15 February, expressed hope the current stand-by arrangement which Croatia was granted last March and which expired in May this year would be completed successfully. IMF and Croatian government representatives confirmed on Friday the latest talks did not tackle a new stand-by arrangement. The talks held over the past week focused on the implementation of the current stand-by arrangement. The IMF and the Croatian government have reached agreement on a changed and revised letter of intent with conclusions, which is to be discussed by the IMF Board of Directors at a session on March 29. Following today's final meeting with the IMF delegation, Croatian Deputy Prime Minister Slavko Linic said the government had to carry out four priority tasks before the IMF Board of Directors' session. Those are the implementation of the Law on Defence, forwarding into parliamentary procedure a bill on the privatisation of the Croatian Oil Industry (INA) and the Croatian Power Industry (HEP), the adoption of a law on employment, and the passing of a law on the privatisation of the Croatian Postal Bank (HPB). The letter also refers to the execution of last year's budget, where no significant objections were made, since all plans in that segment have been realised. Moreover, results in some segments are much better than expected, Flickenschild said. This especially refers to an inflation rate of 2.6% and a strong influx of foreign currency due to the conversion to the euro. The IMF's forecast for this year is a 3.5% growth rate, an inflation rate of less than four percent, with a deficit of less than two percent on the balance-of-payments current account. Flickenschild confirmed that he had been critical towards the Zagreb-Split highway project because it cost 1.5 billion euros, but that he was less critical after the talks with government members and representatives of the Croatian Highways company. It is evident that some highway sub-sections, such as the Sveti Rok tunnel, have been constructed, so that the total value of the project is lower, he said. The IMF official also said Prime Minister Ivica Racan had made it clear the highway was second on the government's priority list and remarked, somewhat ironically, that cooperation with the IMF was around the 45th place on the government's priority list. Asserting that it was not the IMF's duty to discuss the country's social and political priorities, Flickenschild said the IMF was interested in how the project fit into the country's financial and fiscal plan. Commenting on the situation with the Croatian Postal Bank, Flickenschild said the situation seemed less worrying than last year. We have been given last year's business results which show that the bank has made progress, he said. The IMF official said his delegation had been informed about the reasons for the delayed dismissal of 10,000 employees in the state sector, a task which should have been completed by the end of last year. There were also delays in the adoption of defence laws and the like, which should be completed by March 31, after which the task of reducing the number of state employees would be completed. The targeted 10% reduction of the wage budget has not been achieved but efforts would be made to achieve that goal as well, government officials said. Commenting on a projection of an annual growth rate of seven percent, Flickenschild said it was desirable, however, it was dangerous to impose such an objective at the expense of state spending. (hina) sb rml