IMF approves a new Stand-by Arrangement

Published: 19/3/2001

On Monday (March 19, 2001), the IMF Executive Board concluded the Article IV Consultation with Croatia and approved a new stand-by arrangement with Croatia for a period of 14 months, allocating SDR 200 million (special drawing rights), equivalent to USD 250 million. The first tranche can be withdrawn instantly, but in view of a relatively high level of international reserves, this year's favorable balance of payments prospects and good acceptance on capital markets, Croatia does not intend to withdraw the allocated funds at present. In other words, the arrangement will be treated as precautionary - the allocated funds are not withdrawn, but there is a possibility of withdrawal in case a need arises.

This arrangement is significant for Croatia primarily as an international recognition of the soundness of the economic and financial policy that the present government intends to pursue in the forthcoming period. Particular emphasis is placed on rationalization of public consumption, balancing of budget and balance of payment current account, as well as structural adjustments, along with accelerated European integration processes and participation in international economic developments. Accordingly, stimulation of productive employment should follow, accompanied by economic growth in conditions of price and exchange rate stability, which would provide a sustainable improvement of the living standard for the majority of population.

All these changes, supported by the concluded arrangement with the IMF, as well as progress regarding the European Union accession, should advance the competitiveness of the Croatian economy. A higher credit rating implies not only more favorable foreign borrowing for Croatia, but also better prospects for attracting larger foreign direct investments. This, in turn, provides improved employment in the economic industries, and a wage increase which would compensate for the sacrifice of those presently employed, as a solidary contribution to the inevitable reforms and rationalization.

These policies were formulated in the Letter of Intent and Memorandum of Economic and Financial Policies, submitted to the IMF by the beginning of the previous month, signed by the Deputy Prime Minister of the Government of the Republic of Croatia, Minister of Finance and Governor of the CNB. In view of today's approval by the IMF Executive Board, these documents have become a valid and internationally verified program for future activities of the Croatian executive and monetary authorities. The entire set of documents will also become available to the general public - along with the assessment by the IMF highest body, reported when adopting the aforementioned documents - in Croatian and English on the CNB and Ministry of Finance web sites.