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Lithuania: World Bank Approves Structural Adjustment Loan

  • Robert Lyle

Washington, 18 October 1996 (RFE/RL) -- The World Bank has approved an $80 million loan to Lithuania to finance the short-term costs arising from structural reforms that are to be undertaken in the banking, energy, agriculture and social security sectors of the economy.

The bank says the loan is to support an extensive economic reform plan Vilnius has worked out in cooperation with the bank and the International Monetary Fund (IMF). Its main priorities are to solve the banking system's current problems with operations and under-capitalization and to eliminate the most serious sectoral imbalances in the rest of the economy which are contributing to the erosion of bank capital.

The reform program focuses "strongly" on sustainable solutions such as payment enforcement mechanisms and prudent banking practices with effective government supervision, but the loan will also be used to help deal with clearing budgetary arrears, recapitalization of state-controlled banks, and providing partial individual deposit protection for people with bank accounts.