ZAGREB, Dec 5 (Hina) - The Croatian government and the International Monetary Fund (IMF) Mission, which paid a two-week visit to Croatia, on Wednesday morning reached agreement on a draft letter of intent, which the IMF executive
board of directors will discuss in February next year, Mission head Hans Flickenschild told reporters. The visit was the second and last visit of the IMF Mission aimed at inspecting the implementation of a stand-by arrangement Croatia signed with the IMF in March 2001. The arrangement should be implemented by May 2002. The five-member IMF delegation have assessed that Croatia has achieved its macroeconomic goals for this year or that it will achieve them to a satisfactory degree. The government's projection of the Gross Domestic Product growth rate was four percent, but now it seems the rate could be slightly higher; the inflation rate will be around three
ZAGREB, Dec 5 (Hina) - The Croatian government and the
International Monetary Fund (IMF) Mission, which paid a two-week
visit to Croatia, on Wednesday morning reached agreement on a draft
letter of intent, which the IMF executive board of directors will
discuss in February next year, Mission head Hans Flickenschild told
reporters.
The visit was the second and last visit of the IMF Mission aimed at
inspecting the implementation of a stand-by arrangement Croatia
signed with the IMF in March 2001. The arrangement should be
implemented by May 2002.
The five-member IMF delegation have assessed that Croatia has
achieved its macroeconomic goals for this year or that it will
achieve them to a satisfactory degree. The government's projection
of the Gross Domestic Product growth rate was four percent, but now
it seems the rate could be slightly higher; the inflation rate will
be around three percent, which is considerably lower than the
expected 4.5%. The central bank's net foreign currency reserves are
four times higher than expected, Flickenschild said. The fiscal
deficit, which was in the focus of IMF's attention, will not be
higher than 5.3% of GDP, the IMF officials said.
The IMF and the government are optimistic about the expected
economic growth rate in 2002 despite the fact that the situation on
the international market is not brilliant, Flickenschild said.
Next year's economic growth rate may be 3.5%, which is less than
this year's, but is nevertheless good in comparison with other
countries, the IMF officials said, adding the inflation rate would
remain at the same level, which would mean stability. The budgetary
deficit should be reduced from this year's 5.3% to slightly more
than four percent.
The head of the IMF Mission said the IMF was disappointed with the
slow progress of privatisation in 2001. He expressed hope that the
privatisation of banks from the state portfolio, the Croatia
Osiguranje insurance company, the oil industry INA and the HEP
power industry would be carried out soon and that the government
would realise the envisaged 2.5 billion kuna of privatisation
receipts.
Speaking about the Zagreb-Split highway project, Flickenschild
said the IMF delegation did not see any funds in the budget for such
a project and there was not a lot of room for such high expenses. The
project will be discussed next year, too, within talks on a future
stand-by arrangement, he said.
The reduction of salaries in the public sector has started later
than planned, the government has managed to stay in control, and
union claims about a 10% salary cut are not true, he said.
Asked about estimates with regard to the Croatian labour market
next year, Flickenschild said one could not expect a major increase
in employment with a growth rate of 3.5%. According to the latest
data on labour, the unemployment rate is 15.3%, which means that
Croatia is not different from other countries in transition.
The IMF believes that unemployment is a problem but it is not so
difficult if compared to other problems, said Flickenschild,
concluding the government's main problem was financial
consolidation.
(hina) sb rml