Press Release No. 03/24

Press Release: IMF Completes Third Review of Lithuania Under Stand-By Arrangement

February 27, 2003

The Executive Board of the International Monetary Fund (IMF) today completed the third review of Lithuania's economic performance under its 19-month SDR 86.52 million (about US$119 million) Stand-By Arrangement (see Press Release No. 01/36). Completion of this review enables Lithuania to draw an additional amount equivalent to SDR 12.36 million (about US$17 million) from the IMF, bringing the total IMF resources potentially available to Lithuania to SDR 74.16 million (about US$102 million). Lithuania has not so far drawn any of those resources, and the authorities have indicated their intention not to make any purchase under the arrangement.

Following the discussion of the Executive Board, Shigemitsu Sugisaki, Deputy Managing Director and Acting Chairman, said:

"Directors welcome the successful program implementation under the Stand-By Arrangement, with all performance criteria having been met. Macroeconomic performance in 2002 was remarkable, with a rapid pace of real GDP growth and the rate of inflation falling close to zero, a lower-than-programmed general government fiscal deficit, and falling unemployment. The sound monetary framework under the currency board arrangement has contributed to macroeconomic stability and enhanced credibility.

"Further progress was made in structural reforms in 2002, covering tax reform, municipal finances, the Health Insurance Fund, and the energy sector, as well as financial sector reforms in line with Financial Sector Assessment Program recommendations.

"The macroeconomic outlook for 2003 is positive, with real GDP growth expected to remain strong, although the external current account deficit is expected to widen somewhat owing to higher oil prices. A small increase in the fiscal deficit target will be temporary, related primarily to one-time EU accession-related expenditures.

"In the coming years, fiscal discipline will be crucial to achieve the government's medium-term objective of a structurally balanced budget and to support the currency board arrangement. The government is committed to completing its privatization program and other structural reforms geared to improving the business environment and enhancing competitiveness. Additional measures will be introduced to strengthen the financial situation of municipalities and the Health Insurance Fund, and to ensure that there is sufficient administrative capacity for the effective and transparent use of EU transfers in the coming years," Mr. Sugisaki said.