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IMF APPROVES CREDIT FOR GUATEMALA

 WASHINGTON, Dec. 21 /PRNewswire/ -- The International Monetary Fund has approved a stand-by credit for Guatemala, authorizing drawings of up to the equivalent of Special Drawing Rights (SDR) 54 million (about US$75.8 million) over the next 15 months to support the government's 1992-93 economic program.
 Guatemala's economy improved markedly in 1991 -- after a year of severe economic crisis in 1990 -- as a result of restrained fiscal and monetary policies and rising private sector confidence. Real GDP grew by 3.3 percent, the rate of inflation declined to 10 percent from 60 percent, and foreign reserves grew substantially. During the first part of 1992, economic activity accelerated, and inflation remained subdued, but the balance of payments position weakened owing to a steep decline in international coffee prices and a surge in imports.
 Under these circumstances, the authorities decided to strengthen the adjustment efforts initiated in 1991. Their economic program for 1992-93 is designed to achieve real economic growth of around 5 percent in 1992 and 1993, limit the rate of inflation to about 11 percent in 1992 and 6 percent in 1993, and strengthen the balance of payments. The program focuses on consolidating the fiscal position as its key instrument. Thus, the overall public sector deficit will be lowered from 1.2 percent of GDP in 1991 to 0.8 percent in 1993, mainly through a recently implemented tax reform and improvements in tax collection, as well as through a strengthening in the financial performance of state enterprises, particularly that of the state electricity company. Monetary policy under the program will be tightened, and exchange rate policy will be geared to maintaining an adequate level of external competitiveness. The value of the quetzal will continue to be determined by the exchange auction system established in November 1990. Guatemala's external payments arrears are to be eliminated by the end of January 1993.
 The program also envisages trade and financial sector reforms. In the trade area, most of the remaining non-tariff barriers will be removed. In the financial sector, the government intends to build on measures it has already implemented -- such as the liberalization of interest rates, the elimination of credit ceilings, the opening of new banks and the expansion of open market operations. It also plans to revise regulations, strengthen bank supervision and address the financial and management problems of state-owned banks.
 The program will use some of the anticipated increase in tax revenues to raise investment for infrastructure and social services that had been compressed in recent years. In a three-pronged effort, the government will seek to alleviate chronic poverty, particularly in rural areas, by establishing a Social Investment Fund (SIF), financed by external sources; to rebuild areas that have suffered from armed conflict through the National Fund for Peace; and to increase health and education outlays to 3.6 percent of GDP in 1993.
 Guatemala is an original member of the IMF, and its new quota(A) under the Ninth General Review is SDR 153.8 million (about US$216 million). Its outstanding financial obligations to the IMF arising from past operations and transactions currently total SDR 22.38 million (about US$31.4 million).
 (A) A member's quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing and its allocation of SDRs.
 -0- 12/21/92
 /CONTACT: International Monetary Fund, External Relations Department, 202-623-7100/


CO: International Monetary Fund ST: District of Columbia IN: FIN SU:

DC -- DC003 -- 8692 12/21/92 10:17 EST
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Date:Dec 21, 1992
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