ANALYSIS

Transition nations active in IMF loans

by Robert Lyle
RFE/RL Newsline

Of the 183 member-states of the IMF, the countries of the former Soviet Union and its East European allies account for only 14 percent. Yet among the 61 active programs listed by the fund, more than one-quarter are with the nations in transition.

Last month, new loans worth $11.2 billion were approved as part of an IMF-led Russian rescue package. A first drawing of $4.8 billion was released immediately, while a $6.4 billion tranche will be available in September if Russia implements the required reforms.

IMF First Deputy Managing Director Stanley Fischer was in Moscow recently to review program implementation, a trip one IMF official privately described as part of Mr. Fischer's "war against complacency" by Russian officials. Afterward, Mr. Fischer said that "the agreed measures are being implemented" and that if this continues, the September tranche should be available on time as well.

In Kyiv, another IMF team reached tentative agreement with Ukrainian officials on a projected three-year Extended Fund Facility loan of $2.2 billion. The head of the IMF delegation, Mohammad Shadman-Valavi, said the new Ukrainian loan would go to the fund's board of directors in late August. The long-term loan will replace a one-year $585 million stand-by arrangement that was suspended last spring after the Ukrainian government missed a number of key economic targets.

The new program contains a long list of reforms that the government must implement. Thirty-three of those reforms, including a new reduced-deficit budget, had to be in place before the loan could be approved. The IMF had insisted upon parliamentary passage of the entire package but accepted the assurances of speaker Oleksander Tkachenko that the Verkhovna Rada will stand behind President Leonid Kuchma's decree putting the new budget into effect.

Another IMF team was in Sofia last week and reached agreement with Bulgarian officials on a new, three-year extended loan program worth around $800 million. Anne McGuirk, head of the IMF delegation, said the loan would be part of overall foreign funding totaling $1.6 billion that should be available to Bulgaria over the next three years.

Ms. McGuirk said that a key part of the large reform program underlying this proposed new loan is the privatization of state enterprises. The new long-term loan will follow up what was begun under a regular stand-by facility of around $502 million. When Sofia drew the final tranche of that loan in May, the IMF praised Bulgaria for its "good track record" of stabilization and reform.

Romania, whose last one-year stand-by loan of around $414 million expired in May with only two of five tranches drawn, has made no noticeable progress on putting together a new IMF program. Fund officials say they are still waiting for details on how Romania proposes to proceed with a new loan program.

A number of other countries continue to work through their IMF reform programs and draw their loans:

• Bosnia, which received its first stand-by loan of around $81.8 million at the end of May, has drawn nearly $33 million so far.
  
  
• Estonia, which received a stand-by loan of nearly $22 million last December, has not drawn any of the money, as planned. But it has used the IMF technical guidance, which is part of the program.
  
  
• Latvia, similarly, has not drawn any of its loan of around $44.5 million, approved last October. Like Tallinn, Riga took the loans merely to have IMF experts provide advice and guidance.

In addition to Ukraine, countries in the region with Extended Fund Facility loans are:

• Azerbaijan, which has drawn around $43.4 million of its $79 million three-year program approved in December 1996;
  
  
• Croatia, which has drawn about $38.8 million from its $477 million loan, approved in March;
  
  
• Kazakstan, which has drawn the entire $417.6 million of its loan, which was granted in July 1996; and
  
  
• Moldova, whose $182 million loan, first approved in May 1996, has been suspended since last year due to the governments failure to meet the goals to which it had agreed.

An IMF team was in Chisinau in June and worked out a memorandum on economy policy that, if fully implemented, could reopen the loan this fall, perhaps in October. Moldova agreed to revise its budget, tighten fiscal discipline and speed up privatization as pre-conditions for resuming the loan. It had drawn around $50.6 million of the loan before it was suspended.

Seven East European or former Soviet nations have loan programs under the fund's Enhanced Structural Adjustment Facility, a special program of subsidized loans for poorer nations:

• Albania, which has drawn only the first tranche of about $7.9 million from its $47.6 million loan, approved in May;
  
  
• Armenia, which has drawn $91 million from its $136.6 million three-year loan, approved in February 1996;
  
  
• Azerbaijan, which has drawn $75 million from its $126 million long-term loan adopted in December 1996;
  
  
• Georgia, which received approval last week for the latest $37 million drawing from its $224.7 million three-year loan, approved in February 1996. Georgia had previously drawn about $150 million;
  
  
• Kyrgyzstan, which has not yet taken the first drawing on its $87 million loan, approved in late June;
  
  
• Macedonia, which has drawn about $36.8 million of its $73.6 million three-year loan, approved in April 1997; and
  
  
• Tajikistan, which has drawn $24 million from its $130 million loan, approved in early June.

Robert Lyle is a Washington-based RFE/RL correspondent.

Copyright © The Ukrainian Weekly, August 16, 1998, No. 33, Vol. LXVI

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