ZAGREB, March 23 (Hina) - A memorandum on the Croatian government's economic and financial policy, one of several documents of an International Monetary Fund (IMF) stand-by arrangement with Croatia, approved on March 19, has been
available to the public Friday, along with all the other documents.
ZAGREB, March 23 (Hina) - A memorandum on the Croatian government's
economic and financial policy, one of several documents of an
International Monetary Fund (IMF) stand-by arrangement with
Croatia, approved on March 19, has been available to the public
Friday, along with all the other documents. #L#
The arrangement with the IMF will make available 200 million
special drawing rights (worth about US$250 million) for Croatia for
a period of 14 months. But Croatia will not be drawing the rights
unless in cases of special need.
The arrangement is support to the first year of implementation of a
three-year government programme which focuses on fiscal
adjustments, salary discipline and structural reforms in a context
of continued currency stability.
The approval of the stand-by arrangement required certain measures
on Croatia's part, such as the adoption of amendments to the Law on
Croatian Homeland Defence War veterans and the annulment of their
special rights for importing vehicles, as well as laws on public
officials and their salaries.
According to IMF officials, these measures are adequate. But fiscal
expenses vary from preliminary announcements, as the special
rights for veterans have been extended by a month and all public
officials were granted the right to a 0.5 percent annual income
increase, notwithstanding the length of their years of service. The
IMF has stated this has created additional expenditure of 0.5
percent of the GDP.
In the memorandum, the government reiterates its chief middle-term
economic goal is a growth of employment and living standards.
In 2001, an economic growth of four percent is expected, as well as
the maintenance of prices and a 4.5 percent decrease of inflation, a
stable currency rate, decreasing the deficit on the balance of
payments' current account to somewhat less than four percent, and a
decrease of the budgetary deficit from the expected 6.5 percent of
the GDP in 2000 to about 5.3 percent.
Special attention has been paid to income policy. To achieve a ten
percent decrease in the income mass for those being paid from the
budget, the government announced a freezing of salaries to 1,425
kuna (about US$164.7) and reducing the number of public employees
by 10,000 by the end of the year. The government has already decided
on reducing employees at the Interior Ministry by 4,000, while the
remaining 6,000 refers to the Defence Ministry, mainly its
administration.
The memorandum also includes a special appendix specifying
deadlines for implementing the decision on income increase
restriction. By the end of this month, the government should adopt
provisions on coefficients, income budgets for ministries, and
begin investigating salaries of individuals to examine whether
transport compensations are justified.
In ten big government-owned companies, management contracts will
regulate only the incomes of management board members which will
not be higher than the incomes of senior state officials (the salary
of the management board chairman will not be allowed to be higher
than that of a minister).
The memorandum and its appendixes define that any kind of exceeding
of salary budgets will result in compensation measures, for
example, an increase in participation fees for health services and
medicines.
An important part of the memorandum is the area of structural
reforms. These include reforms of the fiscal, monetary and
financial sectors, and public companies and privatisation in
particular. The government has, thus, announced the privatisation
of 327 companies from the portfolio of the Croatian Privatisation
Fund, the Dubrovacka and Croatia banks, Croatia Insurance company
and JANAF (oil pipe line), and the possible privatisation of the
Croatian Post Bank and sections of the INA oil company and the HEP
power company. The government must soon forward five bills into
parliament to regulate the energy supply market and restructure HEP
and INA.
By mid-April, the government will also forward into the parliament
amendments to the law on the privatisation of HT (Croatian
Telecom), which will include suggestions for selling the remaining
state-owned shares in the company.
By the end of May a decision is expected to be reached on the initial
public bid for at least 20 percent of HT shares. The memorandum
reads that should the privatisation of HT be postponed for the
second half of the year, the level of net international reserves
planned for the end of June will be lowered by 121 million dollars.
A letter of intent envisages that Croatian authorities, in
cooperation with the IMF, should review the programme and define
quantity criteria for assessing the success of its implementation
by August 30 and November 30, respectively.
(hina) lml sb