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IMF APPROVES CREDIT FOR THE SLOVAK REPUBLIC

 WASHINGTON, July 27 /PRNewswire/ -- The International Monetary Fund has approved a credit totaling Special Drawing Rights (SDR) 64.35 million (about US$89 million) under the IMF's systemic transformation facility (STF)(A) for the Slovak Republic. A second disbursement under the STF will be available provided progress continues to be made in implementing the agreed reforms. The Slovak authorities intend to seek understandings with the IMF on a program that could be supported by a stand-by arrangement in the upper tranches by the end of 1993. This is the first use of IMF financing by the Slovak Republic since it joined the IMF on Jan. 1, 1993, through succession to the membership of the Czech and Slovak Federal Republic (CSFR).
 In early 1993, the newly independent country faced enormous challenges. The ending of fiscal transfers from the Czech lands revealed large underlying fiscal and external imbalances; the lack of a developed institutional framework significantly complicated the task of economic management; and though a participant in the CSFR's prudent and effective policies over the previous two years, Slovakia started without a policy track record of its own.
 Slovakia's economic program for 1993 aims at a consumer price inflation rate of 30 percent, consistent with an underlying inflation rate of 1 percent per month in the remainder of the year; a substantial reduction in the underlying current account deficit of the balance of payments; and containment of the decline in real GDP to 9 percent. To meet these objectives, strong fiscal action will be the cornerstone of the program; the fiscal deficit in 1993 will be reduced by about 7 percentage points of GDP from its underlying level in 1992, largely on the basis of expenditure cuts. Monetary policy under the program will remain tight to safeguard the external position and to improve price performance, but it will be reoriented toward addressing the legitimate credit needs of the non-government sector. A 10 percent devaluation of the Slovak koruna in July 1993, supported by continued wage restraint and a flexible exchange rate policy under the program, is envisaged to facilitate an improvement in Slovakia's external payments position.
 The authorities plan to accelerate the pace of structural reforms under the program. The results of the nearly complete small-scale privatization are already evident in the growing private sector and the first wave of large-scale privatization is now at the final stage involving the transfer of ownership under a voucher scheme. The second wave of large-scale privatizations has been initiated; with its completion, some 80 percent of state enterprises will have been privatized.
 Reforms in the financial sector will focus on upgrading the supervisory capacity of the National Bank of Slovakia, creating a financial information system, and privatizing remaining state-owned banks. These reforms will effectively complement the freely set interest rates and the liberal licensing policies which make the Slovak financial system relatively free of distortions.
 The Slovak Republic's quota(B) in the IMF is SDR 257.4 million (about US$358 million), and its share of outstanding financial obligations to the IMF following its succession to membership currently totals the equivalent of SDR 340.8 million (about US$474 million).
 (A) The systemic transformation facility is a temporary IMF financing window that provides financial assistance to member countries facing balance of payments difficulties arising from severe disruptions of their trade and payments arrangements due to a shift from significant reliance on trading at non-market prices -- such as prevailed among members of the Council for Mutual Economic Assistance (CMEA) and among states of the former Soviet Union -- to multilateral, market-based trade.
 (B) 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- 7/27/93
 /CONTACT: International Monetary Fund, External Relations Department, 202-623-7100/


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

DC-IH -- DC013 -- 6174 07/27/93 11:17 EDT
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Date:Jul 27, 1993
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