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1996 In Review: IMF And World Bank Invest $18 Billion In Region

  • Robert Lyle



Washington, 30 December 1996 (RFE/RL) - The two global financial organizations, the International Monetary Fund (IMF) and the World Bank, further deepened their commitment to the nations of Central and Eastern Europe and the former Soviet Union in 1996, agreeing to loans to these countries totaling almost $18 billion.

The disbursement of those funds will actually occur over several years, but the total serves to illustrate the extent to which the fund and bank have thrown their support behind the transition process to market economies.

The World Bank says these nations have "embarked on a path of systemic transformation, the extent of which has few parallels in history" and that it is "engaged in one of the greatest efforts in bank history" to help them succeed.

The IMF says it and the bank have both increased the size of the staffs they employ to help deal with the large demand for loans, as well as to fill the demand for technical assistance and training.

Beyond that, it is almost impossible to generalize about these countries, once known collectively as "the Eastern Bloc."

Former World Bank Chief Economist Lawrence Summers -- now the second ranking U.S. Treasury Department official -- says "one of the features of the maturing of the transition process is that it is no longer possible to generalize about the formerly communist countries."

The IMF says the only thing in common any more is the lessons they are teaching the world about shifting from central planning to market-based systems -- that "perseverance with financial discipline and structure reforms creates the basis for sustained growth."

By country, here is a list of IMF and World Bank activity in the past year.


Albania - Received approval of three World Bank Loans totaling $62.5 million in the spring and early summer, for a national roads project, a forestry project and for improving the country's electric power transmission and distribution. There were no IMF loans.

Armenia - World Bank loans totaling $63.8 million were approved in February to help pay for the costs of basic structural changes. The IMF in February also approved a $145.8 million loan under its special "Enhanced Structural Adjustment" program under which interest costs are subsidized for poor countries.

Azerbaijan - The World Bank's International Development Association (IDA) approved a $20.2 million loan for gas system rehabilition in September. IDA loans, for poor nations, are almost interest free. There were no new IMF loans approved this year.

Bosnia and Herzegovina - The World Bank approved $10 million in concessional loans in June for emergency education reconstruction and war victims rehabilitation. In mid-December, $32 million in IDA credits were approved -- $7 million to finance small businesses, $15 million to repair hospitals, and $10 million for an emergency industrial restart program. Bosnia received no IMF funding.

Bulgaria - With the economy in a tailspin, the IMF suspended the about $576 million stand-by loan approved in July after Sofia drew only the first tranche. The fund has recommended the adoption of a currency board form of Central Bank to bring the situation under control, but the main opposition political block says it wouldn't work if implemented by the current Socialist government. The World Bank approved a health sector restructuring loan for $26 million last April, a $30 million economic rehabilitation credit in August and a $24.3 million social insurance program in September.

Croatia - World Bank loans totaling $31.5 million were okayed in March and April for a farm support services project, technical assistance, and a capital markets development program. In late November, a $102 million emergency transport and mine clearing loan was approved, followed in December by a $42 million coastal forest reconstruction project. There were no IMF loans.

Czech Republic - No IMF or World Bank loans.

Estonia - The IMF approved a stand-by program of around $20 million, but to date Tallin has not drawn on the credit saying it has no real need. The World Bank approved a $15.3 million loan for an agricultural project in March.

Hungary - The World Bank approved a $7.75 million loan to buy modern computer equipment and train staff in the Ministry of Finance. There were no IMF loans.

Georgia - The IMF okayed a loan of about $240 million under its "enhanced" program for poor nations, but as of the end of October, Tbilisi had drawn only about $80 million from the credit, which runs to 1999. The World Bank approved a spate of loans early in the year totaling over $90 million. The four loans are for: health, transportation, structural adjustment technical assistance, and underwriting basic reforms in the economic system.

Kazakhstan - The IMF approved one of its extended facility, three-year loans totaling over $445 million. However, because of a number of difficulties Almaty had not drawn anything from the credit as of the end of October. The World Bank approved two loans in June totaling $260 million -- one for irrigation and drainage improvement, the other for basic reforms of the country's financial sector -- followed by two loans totaling $152 million to rehabilitate the Uzen oil field and to modernize the treasury.

Kyrgyzstan - World Bank loans totaling nearly $100 million were approved in May and June, including a health reform project, a sheep development program, a project to rehabilitate power and district heating facilities and two programs as part of an overhaul of the country's financial sector. The IMF made no loans.

Latvia - The IMF approved a regular stand-by loan of around $44 million in May, but like Estonia, Riga chose not to draw on the credit. It was only intended to help establish credit worthiness, officials said. There were no new World Bank loans this year.

Lithuania - World Bank loans of $35.9 million were approved in April and May, one for the Klaipeda geothermal demonstration project and the other for private agricultural development. A $19 million highway project was okayed in September. There were no IMF loans this year.

Macedonia - The World Bank launched $37 million in project loans in May and June -- a private farm support project, a private sector business development program and a health sector transition project. The IMF made no loans during the year.

Moldova - The World Bank okayed three projects totaling $55 million in 1996 -- a $35 million loan for first private sector development, followed in the spring by two smaller loans for agricultural development and energy. There were no IMF loans.

Poland - Two World Bank loans were approved over the year -- one in June for $21.5 million for the Beilsko-Biala water and wastewater project and the other in August for $67 million for a port access and management program. There were no IMF loans in 1996.

Romania - IMF Managing Director Michel Camdessus is visiting Bucharest at the end of the year as the new government attempts to put its reform program back on track. The stand-by loan of around $462 million launched in 1994 has been suspended for over a year. The World Bank approved two large loans for Romania early in the year -- $280 million for a financial and enterprise adjustment project and $120 million for a railway rehabilitation program. In August, the bank okayed a $25 million loan for a water supply project, followed by a $50 million higher education reform program loan in September.

Russia - The IMF extended three-year loan of $10.1 billion approved in March kept making the news because the money is disbursed in monthly tranches of about $340 million if an IMF review team finds Moscow is meeting most of its targets. Poor tax collections caused delays in October and November drawings, but big improvements in revenues started the monthly payouts rolling again in early December. The World Bank approved eight project loans during the year -- $350 million for bridge rehabilitation, $200 million for community social infrastructure, $300 million for enterprise housing divestiture, $89 million for capital market development, $270 million for medical equipment, $58 million for legal reform, $500 million for coal sector adjustment, and $25 million to implement the program to restructure the coal industry.

Slovak Republic - No IMF or World Bank loans in 1996.

Slovenia - There were a number of World Bank loans this year -- a $23.9 million environmental project loan and a package of three loans totaling $49.3 million for an investment recovery program. There were no IMF loans.

Tajikistan - The IMF approved a stand-by loan of around $22 million in the spring -- Dushanbe's first -- and it has all been drawn. The World Bank approved two loans -- a $5 million institution building technical assistance loan and a $50 million agricultural recovery and social protection program. Both were from IDA.

Ukraine - The IMF approved a nine-month stand-by loan of around $862 million in May and Kyiv has already received all but the very last monthly tranch. Discussions are underway for a three-year extended program of around $3 billion that would pick up when the current program ends in February. The World Bank has approved eight loans this year -- $17 million for a housing project, $15.8 million for a coal pilot project -- which led to a $300 million coal sector adjustment loan late in the year -- a $310 million enterprise development program loan, a $2.6 million social projection support loan, a $317 million electricity market development loan, a $300 million agricultural sector adjustment loan, and a $70 million export development program loan.

Uzbekistan - The IMF in mid-December postponed further drawings of a stand-by loan of around $185 million approved in December, 1995, in reaction to Tashkent's limiting of access to foreign exchange. The restriction, coupled with increased credits to agriculture, was a move by the government to try to deal with lower world prices for cotton and a poorer than expected grain harvest. But the IMF says it merely pushed up inflation and halted business and investment. Talks are set for late January in Tashkent. The World Bank approved a $5 million loan for a pilot water supply engineering program in September, but has held off on a proposed $175 million enterprise development program until it sees how the environment for business develops.

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