ZAGREB, Dec 11 (Hina) - The International Monetary Fund (IMF) Mission and the Croatian government have reached an agreement about a new stand-by deal between Croatia and the IMF, Mission head Hans Flickenschild said in Zagreb on
Wednesday.
ZAGREB, Dec 11 (Hina) - The International Monetary Fund (IMF)
Mission and the Croatian government have reached an agreement about
a new stand-by deal between Croatia and the IMF, Mission head Hans
Flickenschild said in Zagreb on Wednesday. #L#
The purpose of the deal is to introduce some discipline in the
election year 2003 and give Croatia a simpler and faster access to
the financial market, while its main objective is to curb the debt's
share in the Gross Domestic Product, Flickenschild told
reporters.
He announced the IMF Executive Board would decide about the stand-
by deal on February 3. The necessary documentation should be
prepared in the meantime, while the Croatian parliament should
address the deal next week.
The deal would refer to the amount of US$140 million, which
Flickenschild said was not crucial for the government in light of
the foreign reserves and the good standing on the international
financial market.
The deal would be valid throughout 2003 and might be extended until
March 2004, when the government would be allowed to draw funds from
it if necessary. Flickenschild said the government had stated in a
letter of intent the funds would not be withdrawn.
The stand-by deal's main objective is the stabilisation of the
debt's share in GDP, which has been growing over the past decade,
jumping from 25 to 57.5 percent of GDP, Flickenschild said.
Two things need to be done to achieve that goal - ensure a relatively
low budgetary deficit and not issue state guarantees, he said.
Flickenschild recalled the state budget parliament adopted last
week envisaged a five percent deficit, which is 1.2 percent less
than this year, although it is estimated it will reach 6.2 percent.
The budgetary deficit will be financed through a meagre
privatisation revenue, a meagre indebtedness on the foreign market
and a higher one on the domestic market.
Flickenschild said the budgetary cuts envisaged for 2003 were
considerable but would nevertheless make it possible to carry out
reforms in education, science, agriculture, and the judiciary.
These reforms will result in new jobs in said sectors although
employment will not grow as there will be layoffs in the defence
sector, said the IMF Mission chief.
The most difficult part of the 2003 budget was the amount set aside
for salaries and the one percent increase in it, said
Flickenschild. He recalled that the government's salary policy did
not envisage either a base increase or a change in coefficients,
with the exception of pays for primary and secondary school
teachers.
As for state guarantees, Flickenschild said they accounted for 14.5
percent of the debt's 57.7 percent share in GDP. The plan is to keep
this percentage, which means the government will issue limited
guarantees on loans, he said.
The stand-by deal's strategic measures are privatisation,
particularly of the oil industry INA, and the amending or passing of
new laws on companies, market competition, labour, and bankruptcy,
said Flickenschild.
The Croatian government intends to carry out six steps even before
the IMF Executive Board adopts a decision on the new arrangement.
According to Flickenschild, these include a five percent budgetary
deficit, collecting data on 53 units of local self-government, the
government's obligation to draw up a new labour act for parliament
to address, and collect offers for and privatise INA. Tax-related
steps have mainly been adopted, he said.
The IMF Mission head said the programme defined by the new stand-by
deal was a very responsible and resolute step the Croatian
government was making in the election year. Flickenschild sees it
as the continuation of the government's policy of fiscal adjustment
and structural reforms.
(hina) ha sb