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The East: Transition Nations Account For A Quarter Of Loans

  • Robert Lyle



Washington, 4 August 1998 (RFE/RL) -- Of the 183 member nations of the International Monetary Fund (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.

July was a particularly active month as fund officials completed negotiations on new loan programs with Russia, Ukraine and Bulgaria.

Most of the headlines were on new loans of $11.2 billion approved as part of an IMF-led Russian rescue package. A first drawing of $4.8 billion was released immediately, with another tranche of $6.4 billion to be available in September if Russia implements the require reforms.

The fund's First Deputy Managing Director, Stanley Fischer, was in Moscow over the weekend reviewing program implementation, a trip one IMF official privately described as part of Fischer's "war against complacency" by Russian officials. Afterward, Fischer said "the agreed measures are being implemented," and that if things continue, 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 around $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, 33 of which, 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 over the weekend accepted the assurances of speaker Oleksander Tkachenko that parliament would stand behind President Leonid Kuchma's decree putting the new budget into effect.

Yet 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 of around $1.6 billion that should be available to Bulgaria over the next three years.

McGuirk told reporters that a key part of the large reform program which underlies this proposed new loan is privatization of state enterprises. "We consider that privatization is the heart of the transition," she said.

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 would propose to proceed with a new loan program.

A number of other countries continue to quietly 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 -- as planned -- not drawn any of the money, but merely used the IMF technical guidance which comes with the program.

Latvia, similarly, has not drawn any of its loan of around $44.5 million approved last October. Latvia and Estonia took the loans merely to have IMF experts provide advice and guidance.

Countries which have longer-term EFF or Extended Fund facility loans, in addition to Ukraine 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 just approved in March;

Kazakhstan, 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 failure of the government 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 which, if completely implemented, could reopen the loan this autumn, 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, including:

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 just last week for the latest $37 million drawing from its $224.7 million three-year loan approved in February, 1996. In addition to the latest drawing, Georgia had previously drawn about $150 million;

Kyrgyz Republic, which has not yet taken the first drawing on its $87 million loan which was approved at the end of June. The Kyrgyz program runs to April, 2001;

Macedonia, which has drawn about $36.8 million of its $73.6 million three-year loan first approved in April, 1997; and

Tajikistan, which has drawn $24 million from its $130 million loan approved in early June.

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