Press Release No. 03/89

Press Release: IMF Completes First and Second Reviews of Nicaragua's PRGF-Supported Program, Approves US$19.8 Million Disbursement

June 19, 2003

The Executive Board of the International Monetary Fund (IMF) has completed the first and second reviews of Nicaragua's performance under a three-year, SDR 97.50 million (about US$138.8 million) Poverty Reduction and Growth Facility (PRGF) arrangement, which was approved on December 4, 2002 (see Press Release No. 02/53). The completion of these reviews enable the release of SDR 13.93 million (about US$19.8 million) to Nicaragua.

The Executive Board also approved Nicaragua's request for waivers on the non-observance of the end-December 2002 structural performance criterion on approval by the national assembly of a 2003 budget for the central government in line with the program, and the end-March 2003 quantitative performance criterion on the net domestic financing of the combined public sector.

Following the Executive Board's discussion of Nicaragua on June 18, 2003, Eduardo Aninat, Deputy Managing Director and acting Chair, made the following statement:

"Nicaragua's performance under its PRGF-supported program has been broadly satisfactory. A moderate recovery of the economy is underway, inflation remains low, the external position has strengthened, and the fiscal program has been kept on track, notwithstanding a difficult economic, social, and political situation and strong pressures for additional spending.
In completing the first and second reviews under the arrangement, the Executive Board noted, in particular, the approval of an appropriate budget for 2003 and of the second stage of the comprehensive tax reform, the implementation of the central banks' asset recovery plan broadly on schedule, and the strengthened enforcement of financial prudential regulations.

"The Nicaraguan authorities have reaffirmed their commitment to the growth and poverty reduction strategy embodied in the program, and the Fund looks forward to its continued forceful implementation supported by strong efforts to secure greater domestic ownership of the reform agenda. Priority objectives for the remainder of 2003 are to further reduce the fiscal deficit while increasing poverty-reducing spending; strengthen the financial sector; and carry to completion the asset recovery plan.

"Sustained structural reforms will remain key to achieving the objectives of Nicaragua's growth and poverty reduction strategy. This will include measures to strengthen tax and customs administration and improve the implementation and monitoring of poverty-reducing programs, as well as continued strong efforts to improve governance, which will strengthen investor confidence and help raise the country's growth potential.

"A continued strong policy performance will enable Nicaragua to reach its completion point under the HIPC Initiative and have access to a substantial relief of its debt burden," Mr. Aninat stated.