IMF MISSION HEAD COMMENTS ON STAND-BY ARRANGEMENT WITH CROATIA

ZAGREB, Dec 20 (Hina) - The programme the Croatian government has come up with for 2001 deserves International Monetary Fund support, the head of the IMF Mission said on Wednesday. Hans Flickenschild spoke to reporters after the IMF and the Croatian government earlier today reached a preliminary agreement on a stand-by arrangement for 2001 worth 200 million special drawing rights. The agreement was reached after several negotiating rounds and as a result of changes in stances on both sides, he said. The consolidated state deficit envisaged originally was eight percent of Gross Domestic Product, but the recently adopted budget starts from a 5.3% GDP deficit, still a lot, although the government has expressed willingness to further decrease the fiscal deficit. According to submitted projections, the cuts would go down to 4.25%, then 2.5 and finally 1.5% of GDP. The state budget would undergo considerable changes, including a ten percent salary budget decrease plan, Flickenschild said. The government's programme is acceptable as it provides for economic growth and employment. This year's 3.5 percent GDP growth should rise to four percent, while this year's eight percent inflation rate should drop to 4.5%, with a stable currency rate and a negligible growth in foreign reserves at the central bank. Speaking about non-privatised property, Flickenschild said the IMF Mission was familiar with plans to continue the privatisation of Croatian Telecom, the Dubrovacka and Croatia banks, and the Croatia osiguranje insurance company. Plans also include stepping up restructuring and launching privatisation in national oil company INA and power supplier HEP, and the privatisation of gas company JANAF. All materials are forwarded to IMF's board of directors, and the stand-by arrangement should be adopted in February or early March. (hina) ha