News Brief No. 02/4

News Brief: IMF Approves US$15 Million Tranche Under Stand-By Credit for Lithuania

January 16, 2002

The Executive Board of the International Monetary Fund (IMF) today completed the first review of Lithuania's economic performance under the 19-month stand-by credit. This decision makes another disbursement of SDR 12.4 million (about US$15 million) available to Lithuania, bringing the total available IMF resources to SDR 24.7 million (about US$30 million).

The stand-by credit was approved on August 30, 2001 (see Press Release No. 36) for a total of SDR 86.5 million (about US$108 million). So far, Lithuania has not drawn from the available IMF resources.

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

"The Lithuanian authorities are to be commended for the continued successful implementation of their economic program, which has contributed substantially to the economy's progress over the last year. Growth was strong, the current account deficit declined further, and inflation remained subdued, although unemployment continues to be high. Structural reforms advanced across a range of areas, including energy sector restructuring, privatization, and fiscal management. Preparations for EU accession have also proceeded at a fast pace.

"Fiscal adjustment over the last two years has been impressive, and the recently approved budget for 2002 appropriately seeks to consolidate these hard-won gains. The authorities' tax reform package represents an important step towards the establishment of a more transparent and efficient tax system that will help to stabilize revenues over the medium term. The recent measures to address the financial weaknesses of the health insurance fund and municipalities are welcome, and the authorities are urged to implement them rigorously.

"The planned repegging of the litas to the euro, with a view to greater economic integration with the EU, is welcome, and preparations for the repegging have proceeded smoothly. While there are no major risks to the stability of Lithuania's financial system, the authorities will continue their efforts to further strengthen the institutional underpinnings of the financial sector, in line with the recommendations of a recent joint IMF-World Bank Financial Sector Assessment Program mission. Looking ahead, it will be important to maintain macroeconomic discipline and the momentum of structural reform to ensure that the economy remains competitive and continues to perform well, even in a potentially more difficult external environment," Mr. Sugisaki said.