Managua, Nicaragua
August 30, 2000
Mr. Horst Köhler
Managing Director
International Monetary Fund
Washington, D.C. 20431
Dear Mr. Köhler:
1. This letter updates the Memorandum of Economic and Financial Policies of
August 19, 1999 relating to the second annual arrangement under the Poverty Reduction and Growth Facility
(PRGF) that was approved on September 15, 1999. The attached Memorandum of Economic and
Social Policies (MESP) describes performance through June 2000 under the program and sets out macroeconomic
objectives, policies, and targets for the remainder of 2000.
2. As discussed more fully in the MESP, certain quantitative performance
criteria of the program for end-December 1999 and end-June 2000 could not be met mainly reflecting delays of
programmed multilateral balance of payments support and unavoidable increases in domestically financed expenditures;
also, certain structural performance criteria for December 1999 and January 2000 were not met because the
implementation of the corresponding structural reforms was delayed. However, to help achieve the objectives of its
economic program for 2000, while helping improve transparency and promoting good governance, the Government is
implementing a policy package that includes actions in the fiscal, credit, structural, and governance areas. In this context,
important actions already have been taken to ensure that performance will return toward the original program path by
end-2000. On this basis, the Government requests: (1) waivers for noncompliance with (a) the end-December
1999 and end-June 2000 quantitative performance criteria, and (b) the December 1999 and January 2000
structural performance criteria; and (2) the satisfactory conclusion of the first and second reviews under the second
annual PRGF arrangement.
3. The Government of Nicaragua remains committed to achieve the objectives and policies detailed in
the letter of August 19, 1999, subject to the modifications requested in the MESP. The
Government believes that the measures and policies described in the MESP are adequate to
achieve these objectives and will continue to work with the International Monetary Fund to take any additional measures
that may be required for that purpose.
4. The Government appreciates the continuing support of the International Monetary Fund, which is
critical to maintaining confidence in Nicaragua's macroeconomic management and in mobilizing the official external
support (including through the Enhanced Initiative for the Highly Indebted Poor Countries) necessary to implement its
medium-term Enhanced Poverty Reduction Strategy, which currently is being developed with broad consultation from
civil society.
Sincerely,
/s/
Noel Ramírez Sánchez
President of the Central Bank |
|
/s/
Esteban Duque Estrada
Minister of Finance |
Attachment
Memorandum of Economic and Social Policies (MESP)
1. This memorandum provides an update of the economic and social policies adopted by the
Government under its program for 1999–2000, which is supported by the second annual Poverty
Reduction and Growth Facility (PRGF) arrangement approved by the IMF's Executive Board on
September 15, 1999. The objectives of the program remain largely as stated in the Memorandum of
Economic and Financial Policies of August 19, 1999, although policies and targets have had to be
modified to take account of recent developments, as outlined below. To continue on the path toward fiscal and external
viability, the Government is undertaking a number of actions (as specified in the attached Box).
Performance through June under the modified program's quantitative benchmarks was satisfactory, and it is expected
that performance will continue satisfactory by end-2000. The Government will take additional measures as necessary to
achieve the modified program's objectives.
Background
2. Nicaragua's good macroeconomic performance continued during 1999, despite the
devastation wrought by Hurricane Mitch in late 1998. Real GDP grew by 7 percent (faster than envisaged
in the program for 1999), while inflation declined from 18.5 percent at end-1998 to 7.2 percent at
end-1999 (lower than foreseen in the program) as the rate of crawl of the cordoba vis-à-vis the U.S. dollar was
slowed in the second half of the year from 12 percent to 6 percent a year. The combined public sector
deficit (after grants) rose to 6.9 percent of GDP, compared with 5.6 percent of GDP in the program, as
stronger investment spending (financed with higher project-related external assistance) more than offset
higher-than-programmed savings. The external current account deficit widened by more than envisaged, mostly
reflecting a greater-than-anticipated deterioration in the terms of trade and a surge in imports of capital goods financed
by direct foreign investment, official grants and concessional loans, the latter related to the reconstruction process after
Hurricane Mitch. While official net international reserves increased substantially, they did not rise as much as envisaged
in the program because of delays in multilateral balance of payments support partly associated with
slower-than-envisaged structural reforms (see below). Because of this, the end-December 1999 performance criteria on
the central bank's net international reserves and net domestic assets, as well as net domestic financing of the nonfinancial
public sector, could not be met.
3. In the wake of Hurricane Mitch, spending focussed on disease prevention, re-supplying of local
medical and educational facilities, and infrastructure reconstruction. With significant international support, social
expenditures increased to 15 percent of GDP in 1999 from 11 percent in 1998, permitting
improvements in related social indicators. By end-1999, basic maternal and infant health care was available to
39 percent of the relevant population, compared with 35 percent at end-1998. In the area of education reform, the
curricula in the primary schools were modernized, and performance incentives were introduced for teachers in
31 percent of autonomous schools.
4. In the structural area, the National Assembly passed legislation to help improve transparency and
efficiency in government procurement. Laws relating to the central bank, commercial banks and the Superintendency of
banks approved in the fourth quarter of 1999 strengthened the autonomy of the central bank and improved the legal
basis for prudential regulation and supervision of financial institutions. At the same time, the remaining state-owned
bank (which was financially weak) was closed and the divestiture of its assets will soon be completed. Moreover, stricter
prudential requirements on banks (including phased-in higher capital adequacy requirements) began to be implemented.
To improve government efficiency and increase resources for funding high priority poverty reducing programs, some
1,100 government positions were eliminated in 1999, bringing the total streamlining under this administration to
about 7,900 positions (equivalent to 11 percent of government employment at end-1996).
5. However, some structural reforms that had been envisaged in 1999 had to be delayed to 2000: the
state-owned telecommunications (ENITEL) and electricity (ENEL) companies could not be offered for privatization
because technical considerations regarding the new tariff structure proved more time consuming than anticipated. Also,
reaching consensus in the National Assembly on the law for the reform of the social security system and the law for
administrative dispute settlement took more time than had been anticipated. The Center for Property Mediation and
Arbitration as well as the property courts did not become operational because of unavoidable delays in arranging donor
financing and staffing the institution.
6. The Government's original economic program for 2000 aimed at reducing inflation further
and promoting the growth of output and employment, while advancing efforts to alleviate poverty and reduce economic
vulnerabilities, on a sustainable basis. However, during the first quarter of 2000, the public finances began to
diverge from the original program path primarily because of higher-than-expected domestically financed spending
associated with (1) reconstruction from a tropical storm in the third quarter of 1999 that destroyed roads and
bridges; (2) litigation of a border dispute with Honduras; and (3) the preparation for the municipal elections to be held in
November 2000 (which earlier had been envisaged to take place together with the presidential elections
in 2001). Moreover, broad money growth slowed, while bank credit to the private sector decelerated only slowly
from very high rates. The above developments were reflected in a decline in official net international reserves. At the
same time, 12-month inflation increased from 7 percent at end-1999 to 15 percent in April 2000, in part
reflecting the surge in international fuel prices.
The modified program for 2000
7. To firm up external support and help achieve the objectives of the program for 2000, the
Government in April began implementing a package of policy measures that included actions in the fiscal, credit,
structural, and governance areas. At the same time, to help protect external competitiveness, it was decided that the
current crawling exchange rate policy would continue unchanged during the remainder of the year.
8. On this basis, and taking into account the unavoidable unprogrammed expenditure commitments
mentioned in paragraph 6 above, the Government's modified macroeconomic program envisages that the combined
public sector deficit (after grants) will be limited to 6.5 percent of GDP, compared with 5.6 percent of
GDP in the original program. This additional public sector financing requirement will be covered by concessional
external borrowing. At the same time, credit policy will be tightened. In this context, inflation is targeted to be held to 10
percent during 2000 (8 percent in the original program), while the central bank's gross international reserves are
expected to be equivalent to 3.9 months of imports (4.2 months in the original program) by year-end. The modified
program is predicated on output growth of 5.5 percent (6.5 percent in the original program). The financial benchmarks
of the government's modified program are set out in Tables 1–7 (attached).
9. To meet the modified program's fiscal targets, the Government has decided to: (1) save most
of the resources from the adjustment of pension contribution rates from 5.5 percent to 10.5 percent in June
(yielding 0.6 percent of GDP in 2000, net of the cost of the recent increase in the minimum pension (0.3
percent of GDP)); (2) change the assessment procedures for collecting excise taxes on cigarettes and alcoholic
beverages as of April, as recommended by the recent IMF technical assistance mission (yielding over 0.3 percent
of GDP in 2000); and (3) reduce domestically financed capital spending by 0.5 percent of GDP, while
protecting priority poverty alleviation outlays. Also, electricity tariffs were increased in January 2000 and will be
adjusted further if necessary to safeguard the savings target of the program. In order to help ensure sustainable
employment growth, the Government has decided to refrain from raising economy-wide minimum and/or public sector
wages any further beyond the increases that were budgeted.
10. To tighten credit conditions, open market operations have been undertaken and some government
resources previously deposited in the commercial banks have been sterilized at the central bank. The Superintendency of
Banks and Other Financial Institutions (SBIF) has continued to phase in higher capital adequacy requirements and
tighten its supervision of the financial system with the introduction of strengthened in situ inspections in July. Also,
regulations limiting commercial banks' short-term external borrowing (which reached record levels at end-1999) were
introduced in June, and credit risk classification is being improved to include exchange rate risk.
11. In early August, the SBIF learned of some large financial operations that undermined the quality
of the loan portfolio of the largest commercial bank in the country (Interbank, with about 14 percent of total bank
deposits), allegedly related to fraud and mismanagement. The SBIF acted decisively by intervening the bank on August
7, 2000. It is presently assessing the magnitude of the problem loans and developing a plan for the bank's
recapitalization or liquidation. At the same time, criminal proceedings against those allegedly involved in criminal
behavior are underway. To maintain confidence in the banking system, the Government has announced that it is backing
fully Interbank's deposits, while the central bank has begun mopping up the liquidity that it had to inject following the
intervention of Interbank (through open market operations, and/or by shifting public sector deposits to the central bank
and/or introducing a temporary marginal reserve requirement). The Government has requested technical and financial
assistance from the IDB and the World Bank to help carry out the bank resolution process.
12. Cognizant of the need to contain demand pressures, as well as to buttress official international
reserves and private confidence in the short run, the modified program provides for depositing a large amount of the
receipts from the privatization of ENITEL and ENEL in the central bank. In 2000, the other uses of privatization
receipts will be limited to: (1) canceling external commercial debts that were taken over by the Government in
preparation to ENEL's privatization; and (2) funding certain poverty alleviating outlays consistent with existing
legislation and in prior consultation with World Bank, IDB, and IMF staff.
13. In the structural area, a major effort is being made to implement fully the reforms envisaged in
the 1999–2000 program (Table 8), notwithstanding the difficulty of
mobilizing political support for many of them. In April 2000, the National Assembly approved the social security law
that reforms the existing, financially nonviable public system and provides for the introduction of funded individual
retirement accounts managed by appropriately regulated private firms, while providing for a government guaranteed
minimum pension to eligible individuals. The revised pension system parameters became effective in June, and a law on
the supervision of the private pension funds will be submitted to the National Assembly by September 2000. Also,
legislation was passed to allow for a restructuring of the internal revenue and customs departments to help improve tax
administration and bolster collection. All the envisaged preparatory actions for the privatization of ENITEL and ENEL
(which is necessary to increase the supply of electricity and telecommunication services and reduce the costs of these
essential services in the medium term) have been taken, including inviting the final bids from the prequalified investors.
ENEL's distribution and thermo-generating units will be awarded shortly and its hydroelectric plant will be sold in the
fourth quarter of 2000. Port facilities will be offered for long-term lease to the private sector by end-2000.
14. In the area of governance, with the aim of improving the efficacy of the Comptroller's Office (CO)
the National Assembly is expected to pass shortly revisions to the law on the CO, which, inter alia, define the role of its
board consistent with international best practices. Also, the CO has completed several high-priority audits and is
expected to develop soon an action plan for its technical strengthening. The National Assembly approved in May an
administrative dispute settlement law that will clarify and strengthen citizens' rights in contesting administrative
decisions when it enters into effect in 2001. The resolution of property rights claims and the issuance of urban and rural
property titles continue and, after some delay, the property mediation and arbitration centers, as well as the other
property courts, have started operations. The judiciary system will be strengthened by the approval of a new penal code,
and laws on penal procedures and public prosecutors are expected in the fourth quarter of 2000.
15. To improve transparency, accountability and efficiency in the use of public funds, a new
government procurement law has been approved and its implementing regulations issued. A modern system of
government procurement and contracting is being designed with IDB assistance and will begin later this year. In
addition, a centralized and computerized treasury cash-management system (caja única—covering
all revenue and transfers from domestic sources) will become effective shortly. Implementation of the financial control
and audit system—SIGFA—continues, albeit with delays associated with the longer-than-anticipated time
needed to procure the equipment and introduce the modern computerized systems under a revised implementation
schedule agreed with the World Bank.
16. Social policies will continue to focus on improvement in human capital through reforms of the
education and health sectors. In both areas, important progress has been made in institutional strengthening and
decentralization of management and delivery of services. Also, a pilot social safety net project was initiated in the first
half of 2000, with financial and technical support from the IDB, which will provide financial incentives to some
10,000 extremely poor households to improve the nutrition of children under five years of age, seek preventive health
care, and encourage school attendance.
17. Work on a comprehensive poverty reduction strategy paper (PRSP) started in
October 1999, with the results of the 1998 living standard measurement survey (financed by the World
Bank and other donors) serving as a basis for a country poverty profile. This document has benefited from several
months of public discussion, facilitated by the National Council for Economic and Social Planning, which includes
representatives of the private sector, NGOs, labor unions, political parties, universities, and community service
organizations and the government. In August, the government completed a strengthened Poverty Reduction Strategy
(SPRS), including monitorable targets and intermediate indicators, an action plan, information on programs and
projects, and its estimated financing requirements, which is to be submitted to the Executive Boards of the IMF and the
World Bank shortly.
Attachments
|
Prior Actions for the Completion of the Second Review
under the Second Annual PRGF Arrangement
Conditions for, or actions to be taken prior to, Executive Board consideration of the second review under the second
annual PRGF arrangement are:
- Compliance with the modified quantitative benchmarks for June 2000.
- Fiscal policy: Implementation of the following revenue measures to help close the fiscal gap:
(i) From April 2000, withhold the excise tax on spirits sold by small producers at the time of their alcohol
purchases.
Status: Done in April 2000. Supplemented by modifications of the reference prices used to calculate excises on
cigarettes and alcoholic beverages, for a total yield of 0.3 percent of GDP in 2000.
(ii) From June 2000, increase the pension contribution rate from 5.5 percent to 10.5 percent.
Status: The increase became effective in June 2000; however, it is being challenged in the courts. The yield of
the measure, net of the cost of the concomitant increase in the minimum pension, is 0.6 percent of GDP in
2000.
a. Implementation of steps to ensure that all domestic receipts (revenue and transfers) of government entities are
covered by the treasury's centralized cash-management system ("cuentaúnica")—implement a
payments module and sign agreements with the central bank and commercial banks.
Status: Mostly done. The accounting and reporting procedures for the commercial banks, the central bank and
the Ministry of Finance as well as the shared software have been implemented. A formal agreement between the
Ministry of Finance and the central bank on remuneration of government's deposits is pending.
b. Issuance of satisfactory regulations to implement the recently passed law on public sector procurement.
Status: Done in May 2000.
Satisfactory assurances that actions have been taken for the release in short order of the US$51 million of
multilateral disbursements delayed from 1999.
Status: Following completion of the external examination of the BANIC privatization process, which did not find
evidence of corruption, the World Bank disbursed US$16 million in July 2000. Following issuance of the electricity
tariff regulation and the final bidding documents for the privatization of ENEL, the IDB disbursed US$10 million in
August 2000. Adoption of a satisfactory plan for the private recapitalization of BANIC and of a satisfactory resolution
plan for Interbank (conditions for a US$25 million tranche from the IDB) is pending.
|
Table 1. Nicaragua: Ceilings on the
Cumulative Net Domestic Financing Of the Nonfinancial Public Sector1 2
(In millions of cordobas) |
|
| Period |
Limits |
|
| December 31, 1999–March 31, 2000 |
–80 |
| December 31, 1999–June 30, 2000 |
–375 |
| December 31, 1999–September 30, 2000 |
–920 |
| December 31, 1999–December 31, 2000 |
–1,460 |
|
1The net domestic financing of the nonfinancial
public sector is defined as the change from their respective stock at end-1999 of the sum of (i) outstanding stock of
indebtedness of the nonfinancial public sector to the domestic banking system (central bank and commercial banks
including the FNI) net of deposits (including arrears that correspond to obligations considered eligible for refinancing or
rescheduling, or other debt-reduction mechanism) with the foreign currency part of the net debt to the banking system
converted into cordobas at C$12.7 per U.S. dollar; (ii) outstanding stock of domestic public debt (excluding
compensation bonds) held by the private sector; (iii) outstanding stock of supplier credits; and (iv) outstanding stock of
floating debt. In addition, the net domestic financing includes the net financial support provided by the government to
commercial banks.
2These ceilings will be adjusted: (i) cumulative from end-1999 downward (upward) in the event of higher
(lower) disbursements of balance of payments support resources (as described in Table 3, fn. 2, (iii) and (iv)); (ii)
downward (unlimited) by the proceeds from privatization of ENITEL and ENEL (as described in Table 3, fn. 2, (iv) and
(v)); (iii) downward (unlimited) by the proceeds of donor aid for the financing of the municipal elections; and (iv)
upward (by no more than the equivalent of US$8.5 million) in the event of higher than programmed debt service
payments to CABEI (to facilitate the privatization of ENITEL) or to other creditors (to conclude satisfactory debt
agreements).
|
Table 2. Nicaragua: Floors on Cumulative
Savings of the Combined Public Sector1
(In millions of cordobas) |
|
| Period |
Limits |
|
| December 31, 1999–March 31, 2000 |
240 |
| December 31, 1999–June 30, 2000 |
790 |
| December 31, 1999–September 30, 2000 |
1,180 |
| December 31, 1999–December 31, 2000 |
1,490 |
|
| 1Defined as the difference between current revenue
and current expenditure of the nonfinancial public sector plus the operating results of the central
bank. |
Table 3. Nicaragua: Floors for Cumulative
Flows of Net International Reserves of the Central Bank1 2
(In millions of U.S. dollars) |
|
| Period |
Limits |
|
| December 31, 1999–March 31, 2000 |
–86 |
| December 31, 1999–June 30, 2000 |
–50 |
| December 31, 1999–September 30, 2000 |
–30 |
| December 31, 1999–December 31, 2000 |
33 |
|
1Net international reserves are defined as the
difference between the (i) foreign assets of the central bank; and (ii) central bank's reserve liabilities (including
outstanding purchases from the IMF), plus arrears on foreign debt service, plus foreign currency deposits of commercial
banks at the central bank.
2These floors will be adjusted: (i) upward (unlimited) with respect to the net issue during 2000 of CENIs
plus other central bank or government paper held by the private sector in excess of C$435 million;
(ii) upward (unlimited) by any increase in the stock as of March 30, 2000 of short-term central bank or
government paper; (iii) cumulative from end-1999 upward (unlimited) in the event of higher disbursements of balance
of payments support resources with respect to US$8.4 million up to the first quarter of 2000, US$20.4 million up
to the first half of 2000, US$68.0 million up to the first three quarters of 2000, and US$106.9 million over
2000; (iv) downward (by no more than US$35 million) in the event of lower disbursements of balance of
payments support with respect to US$106.9 million over 2000; (v) upward (unlimited) by the proceeds from
privatization of ENITEL, except those used for debt reduction operations and to finance poverty alleviating capital
expenditures in prior consultation with the staffs of the Fund and the World Bank; (vi) upward (unlimited) by the
proceeds from the privatization of ENEL except for: amounts used to cancel commercial debts taken over by the
government in preparation to ENEL's privatization, and up to US$10 million used to finance poverty alleviating
capital outlays in prior consultation with the staffs of the Fund and the IDB; (vii) upwards (unlimited) by the
proceeds of donor aid for the financing of the municipal elections; and (viii) downwards (by no more than US$8.5
million) in the event of higher than programmed debt service payments to CABEI (to facilitate the privatization of
ENITEL) or to other creditors (to conclude satisfactory debt agreements). |
Table 4. Nicaragua: Ceilings on the
Cumulative Change in the Net Domestic Assets Of the Central Bank1 2
(In millions of cordobas) |
|
| Period |
Limits |
|
| December 31, 1999–March 31, 2000 |
970 |
| December 31, 1999–June 30, 2000 |
430 |
| December 31, 1999–September 30, 2000 |
150 |
| December 31, 1999–December 31, 2000 |
–210 |
|
1The change in the net domestic assets of the
central bank (NDA) is defined as the difference between the change in the stock of currency issue and in the net
international reserves (as defined in footnote 1 of Table 3) valued at C$12.7 per U.S. dollar.
2Corresponding offsetting adjustments will be made to the ceilings on the net domestic assets of the central
bank for the adjustments in net international reserves (as described in the footnotes of Table 3). |
Table 5. Nicaragua: Ceilings on the
Cumulative Disbursements of Nonconcessional External Loans
Contracted or Guaranteed by the Public Sector1
(In millions of U.S. dollars) |
|
| Period |
Limits |
|
| More than one year maturity |
|
| December 31, 1999–March 31, 2000 |
0.0 |
| December 31, 1999–June 30, 2000 |
0.0 |
| December 31, 1999–September 30, 2000 |
0.0 |
| December 31, 1999–December 31, 2000 |
0.0 |
| |
One year or less maturity2
December 31, 1999–March 31, 2000
December 31, 1999–June 30, 2000
December 31, 1999–September 30, 2000
December 31, 1999–December 31, 2000
|
0.0
0.0
0.0
0.0 |
|
1These ceilings refer to loans contracted or
guaranteed by the public sector, with maturity of more than one year and grant element of less than 35 percent
calculated on the basis of currency specific Commercial Interest Reference Rates (CIRR) as discount rates. These limits
exclude reserve liabilities of the central bank and the capitalization of interest resulting from rescheduling or refinancing
operations.
2Excludes normal import-related credits. |
Table 6. Nicaragua: Indicative Ceilings on
the Cumulative Deficit of Combined Public Sector1
(In millions of cordobas) |
|
| Period |
Limits |
|
| December 31, 1999–March 31, 2000 |
–1,390 |
| December 31, 1999–June 30, 2000 |
–2,420 |
| December 31, 1999–September 30, 2000 |
–3,430 |
| December 31, 1999–December 31, 2000 |
–4,100 |
|
| 1The balance of the combined public sector
(excluding grants) is measured from above the line and is defined as the savings of the combined public sector (as given
in Table 2) plus capital revenue less capital expenditure (including net lending) of the nonfinancial public
sector. |
Table 7. Nicaragua: Indicative Ceilings on
the Cumulative Total Expenditures of the Central Government1
(In millions of cordobas) |
|
| Period |
Limits |
|
| December 31, 1999–March 31, 2000 |
2,880 |
| December 31, 1999–June 30, 2000 |
5,660 |
| December 31, 1999–September 30, 2000 |
8,610 |
| December 31, 1999–December 31, 2000 |
11,400 |
|
| 1Total expenditures include current spending,
capital spending, and net lending operations. |
| Table 8. Nicaragua: Structural Benchmarks and Performance
Criteria for 1999–2000 |
|
Policy Measures |
|
Expected Date and Status |
|
| 1. Preliminary HIPC document |
|
|
| |
|
|
|
Approval by the national assembly of the three
financial |
|
Done |
| sector laws. |
|
|
| |
|
|
| Approval by the national assembly of the public sector |
|
Done |
| procurement law. |
|
|
| |
|
|
| Submission to the national assembly of a social security |
|
Done |
| reform bill. |
|
|
| |
|
|
| Satisfactory progress in improving governance: |
|
|
| - transparency and accountability in the management |
|
Pending; see below |
| of public finances. |
|
|
| - settlement of property claims. |
|
On track; see below |
| - strengthening of the judiciary. |
|
On track; see below |
| |
|
|
| Social Safety Net: Start to implement a pilot project. |
|
Done |
| |
|
|
| 2. Second annual arrangement under the PRGF |
|
|
| |
|
|
| Public sector reform |
|
|
| |
|
|
|
Restructuring of the revenue and customs departments:
|
|
|
| - Approval of a law on transformation of the revenue and |
|
Done in March 2000; November 1999 in PFP. |
| customs department. |
|
|
| |
|
|
- Start implementation of performance indicators for tax
and customs collection, as recommended by the IDB. |
|
Delayed, expected for October 2000; January 1999in PFP. |
| |
|
|
Continue to implement a labor mobility program aiming
at reducing public sector positions (excluding
reductions resulting from privatization of public
enterprises). |
|
Done; 1,085 positions were eliminated in 1999, the plan of reducing 3,300 positions in
1997-99 was exceeded. |
| |
|
|
National System of Public Investment (SNIP): issue a
decree strengthening its status and mandate. |
|
Delayed, expected for October 2000; January 1999in PFP. |
| |
|
|
| Privatization and public sector tariffs |
|
|
| |
|
|
| ENITEL (reactivated privatization program): |
|
|
| |
|
|
| - Implement a program to reduce the enterprise's |
|
Done. Employment reduced by about 830 or 26 |
| operating expenditure by at least 20 percent in 1999. |
|
percent since October 1998, of which about 540 |
| |
|
during June-September 1999. |
| |
|
|
| - Approve tariff adjustment along the lines |
|
Done. Tariffs raised to increase revenue by about |
| recommended by the World Bank and the |
|
10 percent in January 1999 and by about another |
| advisory investment bank. |
|
10 percent in September 1999. |
| |
|
|
- Approve a three-year tariff adjustment plan along the
lines recommended by the World Bank and the
advisory investment bank.1 |
|
Done in May 2000; November 1999 in 2nd. year PRGF. |
| |
|
|
| - Complete the pre-qualification process. |
|
Done in November 1999 as envisaged. |
| |
|
|
- Invite final bids of pre-qualified investors for 40 percent
of ENITEL assets.1 2 |
|
Done in June 2000; January 2000 in 2nd. year PRGF. |
| |
|
|
| - Announce results of the bidding (award). |
|
September 2000. |
| |
|
|
| ENACAL: |
|
|
| - Continue adjusting water and sewerage tariffs by |
|
On track: In January 2000 the average tariff was |
| 1.5 percent a month |
|
raised by 21 percent compared with the average tariff in 1999. |
| |
|
|
- Offer concession for private management of regional
water and sewerage sub-systems: |
|
Delayed; for December 1999 in preliminary HIPC document. |
| - Leon and Chinandega |
|
Expected to be offered in September and awarded in November 2000. |
| - Matagalpa and Jinotega |
|
Expected to be offered in January and awarded in April 2001. |
| |
|
|
| ENEL: |
|
|
- Issue regulation on setting tariffs for electricity
generation and distribution by the units to be privatized,
as recommended by the investment bank and IDB.1 |
|
Done in June 2000; October 1999 in 2nd. year PRGF. |
| |
|
|
- Issue final bid documents for ENEL's generation and
distribution units (invite offers).1 2 |
|
Done in June 2000; December 1999 in 2nd. year PRGF. |
| |
|
|
| - Announce results of the bidding (award): |
|
|
| The distribution units |
|
September 2000. |
| The thermal generating plants |
|
October 2000. |
| The hydroelectric plant |
|
December 2000. |
| |
|
|
| ENABAS |
|
|
| |
|
|
| - Divest or lease 75 percent of assets |
|
For December 1999 in PFP. Done. Facilities |
| |
|
accounting for 80 percent of capacity have been leased to the private
sector. |
| |
|
|
| ENAP |
|
|
-
Offer to private investors long-term concessions for
ports facilities (Puerto Cabezas, Potosi, Corinto, San Juan
del Sur). |
|
December 2000. |
| |
|
|
| Governance (additional benchmarks below) |
|
|
| |
|
|
| TRANSPARENCY: |
|
|
| Ensure that all domestic receipts (revenue and transfers) |
|
For September 1999 in 2nd PRGF: Delayed; most |
of the public sector entities are recorded at the treasury
(cuenta unica).1 |
|
elements functioning; implementation of an agreement between the Ministry of
finance |
| |
|
and the central bank is pending. |
| |
|
|
Achieve full coverage of treasury operations in the
financial control system (SIGFA). |
|
Done in January 2000; September 1999 in 2nd. PRGF. |
| |
|
A decentralized accounting and integrated communication system to record in real
time |
| |
|
all stages of expenditure (including commitments) |
| |
|
is expected to be in place by January 2001. |
| |
|
|
| Ensure transparency and accountability in public sector |
|
|
| procurement of goods and services and in awarding |
|
|
| public works: |
|
|
| |
|
|
| - Approval of the law. |
|
Done in December 1999; September 1999 in the 2nd. PRGF. |
| - Issue the regulations.1 |
|
Done in March 2000; September 1999 in 2nd. year PRGF |
| |
|
|
| JUDICIAL REFORM: |
|
|
| |
|
|
| Establish a National Center for Property Mediation. |
|
Done in June 2000; September 1999 in 2nd PRGF. |
| |
|
|
| Approval of the administrative dispute settlement law. |
|
Done in May 2000; December 1999 in PFP. |
| |
|
|
| Approval of the laws on the reform of judicial process: |
|
|
| - A new law on public prosecutors (fiscalia). |
|
October 2000. |
| - A new penal code. |
|
December 2000. |
| - A new law on penal procedures. |
|
December 2000. |
| |
|
|
| PROPERTY RIGHTS: |
|
|
| Accelerate issuing of property titles and settlement of |
|
|
| property rights claims. Property titles issued in 1999: |
|
|
| |
|
|
| - Urban: 10,000 |
|
6,720 titles issued. |
| - Rural: 4,000 |
|
4,640 titles issued. |
| |
|
|
| Property rights claims settled: 1,000 |
|
The administrative process completed for 1376 |
| |
|
claims; of which for 960 claims properties returned or payment made. |
| Financial system reform: |
|
|
| |
|
|
| Implement fully according to the initially established |
|
Ongoing |
| schedule the prudential norms on banks' capital |
|
|
| adequacy and lending to related parties. |
|
|
| |
|
|
| Issue a revised prudential norm on asset-risk classifi- |
|
For October 1999 in 2nd. PRGF: Delayed in |
cation and provisioning along the lines recommended
by the World Bank. |
|
consultation with the World Bank staff; technical support is required. |
| |
|
|
| Social security reform: |
|
|
Approval of the social security reform law by
the National Assembly.1 2 |
|
Done in April 2000; December 1999 in 2nd. year PRGF.. |
| |
|
|
| Implement the revised pension system parameters (the |
|
For January 2000 in 2nd. PRGF. Effective from June |
retirement age, minimum contribution period, and the
level of contribution). |
|
2000, but being challenged by the Controller's Office and in courts. |
| |
|
|
| Submit to the Assembly a law on supervision of private |
|
September 2000. |
| pension funds. |
|
|
| |
|
|
| Trade and investment policy: |
|
|
Submit to the National Assembly a revised law on foreign
investment. |
|
Done in December 1999; September 1999 in 2nd. PRGF. |
| |
|
|
| - Approval of the law on foreign investment. |
|
Done in May 2000; January 2000 in 2nd. PRGF. |
| |
|
|
| Education: |
|
|
| - Adopt new procedure for selecting directors of |
|
For December 1999 in Preliminary HIPC; Delayed; |
| autonomous schools |
|
will be set in a law on school autonomy, submitted to the Assembly in May
2000. |
| |
|
|
| - Management by local boards of 95 percent of secondary |
|
Done; by end-1999 secondary schools accounting |
| schools and 65 percent of primary schools. |
|
for 95 percent of students and primary schools |
| |
|
accounting for 62 percent were managed by autonomous local boards. |
| |
|
|
| 3. Additional governance measures |
|
|
| |
|
|
| Enable normal operations of the Comptroller's General |
|
|
| Office (CGR): |
|
|
|
- Complete the review of pending cases and announce the
|
|
Done in July 2000; two major cases assessed and |
| list of priority cases to be audited. |
|
follow-up actions taken; a list of priority outstanding cases identified. |
| |
|
|
- Approval by the National Assembly of a
|
|
September 2000. |
| satisfactory law on the CGR. |
|
|
| |
|
|
| - Adopt and announce an action plan for CGR, including |
|
September 2000. |
| a program for its technical strengthening. |
|
|
| |
|
|
|
- Implement improved mechanism and procedures for |
|
October 2000. |
accepting and processing allegations of misuse of public
funds. |
|
|
| |
|
|
| - Submit to the Assembly a draft law on accountability of |
|
October 2000. |
| public officials. |
|
|
| |
|
|
- Approval by the National Assembly of a civil
service
law |
|
September 2000. |
| |
|
|
| 4. Poverty reduction strategy |
|
|
| |
|
|
| Issue the results of the poverty survey, establish and |
|
Done; November 1999. |
| start a consultative process with civil society |
|
|
| |
|
|
| Prepare an outline of the strategy and consult it with civil |
|
Done; December 1999-April 2000. |
| society. |
|
|
| |
|
|
| Complete a broadly consulted interim policy reduction |
|
Done in August 2000. |
| strategy paper (I-PRSP). |
|
|
|
Sources: Nicaraguan authorities and staffs of the IDA, IDB, and IMF.
1Prior action for proposing completion of the first midterm review under the 2nd annual PRGF
arrangement.
2Performance criterion under the 2nd. Annual PRGF arrangement. |
|
