News Brief: IMF Completes Second Review of Lithuania Under Stand-By Arrangement
Republic of Lithuania and the IMF
Country's Policy Intentions Documents
Free Email Notification
of Intent, Supplementary Memorandum of Economic and Financial Policies,
and Technical Memorandum of Understanding
Mr. Horst Köhler
Dear Mr. Köhler:
1. Lithuania's economic policies aim at promoting sustained economic growth and improved living standards through macroeconomic stability and the further implementation of structural reforms. Early accession to the EU and NATO remain our main policy goals. The key elements of our economic policy strategy will be to maintain the currency board arrangement as the cornerstone of macroeconomic stability; to further fiscal consolidation in order to support external viability; and to advance the remaining key structural reforms at a fast pace so as to foster an efficiently functioning market economy and greater competitiveness. The attached Supplemental Memorandum of Economic Policies (SMEP) specifies the concrete policy measures to be taken during July—December 2002.
2. In support of the policies detailed in the SMEP, we request completion of the second review of the stand-by arrangement with the International Monetary Fund (IMF) that was approved by the IMF Executive Board on August 30, 2001 in an amount equivalent to SDR 86.52 million. We do not envisage at this time making purchases under the arrangement, but could do so if economic circumstances were to be worse than expected. We understand that the Fund will continue to monitor the program on the basis of quarterly performance criteria, and one more program review will be conducted, as described in the original Memorandum of Economic Policies signed on July 26, 2001 and the attached SMEP.
3. We believe that the policies described in the SMEP are adequate to achieve the objectives of the program, but will stand ready to take additional measures as necessary to achieve those objectives. During the period of the arrangement we will consult with the IMF on the adoption of any such measures that may be appropriate, in line with the Fund's policies on such consultations.
4. We are committed to transparency in our economic policies, and we authorize the Fund to publish this letter and the SMEP following Executive Board consideration of the second program review.
1. The economic program supported by the Stand-by Arrangement (SBA) with the IMF is being implemented with positive results. Growth of real GDP accelerated in 2001 to 5.9 percent, compared with 3.9 percent in 2000. The external economic position strengthened further, with the current account deficit narrowing from 6.0 percent to 4.8 percent, as exports of goods and services grew by a further 21 percent in real terms. Annual average CPI inflation amounted to just 1.3 percent in 2001. These positive trends have continued in 2002, with real GDP growth of 4.1 percent in the first quarter. Supported by favorable macroeconomic developments and thorough preparation, the litas was successfully repegged to the euro on February 2, 2002. Confidence continued to strengthen after the repegging, as reflected in a further decline in spreads. The unemployment rate dropped to 11.8 percent at end-April. Structural reforms also advanced, particularly in the energy sector and banking privatization. This memorandum extends the objectives and framework described in the Memorandum of Economic Policies (MEP) of July 26, 2001 and in the Supplementary Memorandum (SMEP) of December 13, 2001.
2. All program performance criteria for end-December 2001 and end-March 2002 were met, while program structural benchmarks have been implemented, albeit in some cases with slight delays. The benchmark on zero arrears of the central budget for end-March was not observed, as the state budget incurred LTL 6 million of arrears. By contrast, the government took a decision to clear all arrears of the Health Insurance Fund (HIF) in late-December, with final payment in March. New VAT and corporate income tax (CIT) laws were approved by Seimas. However, submission to Seimas of the new personal income tax (PIT) law was delayed from January until May. Finally, municipal finances remain weak and a source of concern.
II. The Government's Program
A. Macroeconomic Outlook
3. The macroeconomic outlook for 2002 envisages continued growth and low inflation. For 2002, real GDP is projected to grow by 4.4 percent, with weakening external demand, mainly from the EU area, largely offset by stronger domestic demand. Rapid growth in private investment and private consumption would contribute to a widening of the external current account deficit to 5.9 percent of GDP. The current account deficit would be financed by sizeable capital inflows, including a pick-up in greenfield foreign direct investment and privatization receipts. CPI inflation is projected to remain subdued at 1.5 percent. The continued expansion would lead to a further reduction in the unemployment rate.
4. Over the medium term, macroeconomic policies continue to aim at achieving real growth rates of 5-6 percent per year, with low inflation and faster productivity growth than in trading partners, to maintain competitiveness. An appropriately cautious fiscal position remains essential, in light of remaining fiscal weaknesses and the need to provide for substantial financing of EU- and NATO-accession related projects. Hence we recognize the need to reverse the recent erosion of tax revenue via the tax reform, and to limit claims from the savings and land restitution schemes to no more than 0.1 percent of GDP per year each. Such prudence is also warranted by a possible further widening of the current account deficit, fueled by a rapid acceleration of domestic demand and commercial bank credit, as well as significant gross external financing requirements over the next few years, which could threaten external viability.
B. The Currency Board Arrangement
5. After the successful repegging of the litas to the euro on February 2, 2002, the Currency Board Arrangement (CBA) has continued to anchor economic policies. The government and the Bank of Lithuania (BoL) believe that the CBA in its present form should be preserved until accession to ERM2 and eventually adoption of the euro.
6. Program projections of money and credit growth rates for 2002 have been revised to 17 and 25 percent, respectively. This revision reflects a faster increase in money demand and a greater willingness of banks to look for lending opportunities, attributable to the privatization-induced strengthening of the banking system. A low interest rate environment, better business opportunities for investment and the development of mortgage finance instruments would also contribute to credit growth. In this regard, the BoL is mindful of the potential additional risk to banks' portfolios associated with rapid credit growth, and the banking supervisory authority will continue to step up its efforts to maintain the soundness of the banking system. Consistent with our strategy to bring gradually the required reserve ratio to ECB levels, this ratio was reduced from 8 percent to 6 percent beginning on May 24, 2002. This would contribute only marginally to higher growth of money and credit. Moreover, as of November 24, 2002, the maturity of deposits subject to reserve requirements will be increased from 1 year to 2 years. Further adjustment in the required reserve ratio will only be undertaken in consultation with Fund staff. Under the current circumstances, given ample liquidity, the BoL does not consider it advisable to undertake any further reductions in 2002.
C. Fiscal Policy in 2002
7. The fiscal deficit target of 1.5 percent of GDP remains appropriate and continues to be the government's objective for 2002. Revenue improved somewhat in the first quarter of 2002, reflecting the pick-up in domestic demand, increased collection on account of the natural resource tax, and better tax administration, especially by customs. However, the yearly target remains as originally programmed, given the uncertainties about the recovery of external demand, in particular in the EU area. Thus, a budget revision, to be submitted to Seimas in June, maintains the same deficit target. The revision involves some current expenditure reallocation (about 0.1 percent of GDP) and a slight increase in capital expenditure (about 0.1 percent of GDP), financed largely by an upward revision of revenue, mainly of consumption taxes, in line with recent trends. The financing strategy remains broadly unchanged; after the successful placement of a €400 million eurobond in April, financing will rely mainly on the domestic market and will be geared toward diversifying and lengthening maturities of treasury securities.
D. Structural Policies
Financial Structural Reforms
8. Following the FSAP and an EU peer review that took place in April 2002, the government and BoL will continue to implement a number of measures in the financial sector. In the area of supervision of credit institutions, the BoL is preparing: (i) changes to rules on large exposures, to strengthen controls over connected lending, as well as lending to groups of affiliated companies; (ii) detailed reporting on qualified holding in banks and legal amendments to suspend shareholders' voting rights in cases of misconduct; and (iii) changes to rules on loan provisioning, in line with Basel recommendations, to allow for commercial banks to establish valuation for non-marketable, non-current loans, within an overall framework supervised by the BoL. Finally, the BoL is making its best effort to conclude additional cooperation arrangements with regulatory authorities of the countries of origin of major shareholders of Lithuanian banks, during the program period. In the area of anti-money laundering (AML) and combating terrorist financing, the newly reorganized Financial Crime Investigation Service (FCIS) has recently increased staffing and will receive technical assistance for training via a major EU-PHARE project. AML practices in insurance and capital markets have recently been strengthened, including by amendments to the law on the Prevention of Money Laundering passed by Seimas on March 28, 2002, which extended responsibility for implementation of AML legislation to the State Insurance Supervisory Authority (SISA) and to the Lithuanian Securities Commission (LSC). FCIS has prepared regulations for SISA and LSC on the detection and reporting of suspicious activities and is strengthening cooperation with other national financial investigation units in the region. By end-September, the government will consider amendments to regulations on suspicious transactions to account for eight new recommendations on combating terrorist financing of the Financial Action Task Force. By end-March 2003, the government will introduce further amendments to comply with EU AML directives by widening the coverage of agencies and businesses that must report on financial transactions. Moreover, the BoL is updating its training and instructions for supervisors for new "Know Your Customer" rules introduced in December 2001. To strengthen the payments system, the government and BoL are preparing a new law on Funds Transfer and Securities Settlement Systems to implement an EU directive on Settlement Finality in Payment and Securities Settlement Systems. This new law, which will be presented to the government by end-September 2002 and to Seimas in 2003, will provide for full enforceability of netting in the payments system and for formal BoL oversight of payment systems it does not directly operate, both key recommendations of the FSAP. In the insurance regulation area, amendments to the existing law on Insurance were approved by the government in mid-April and Seimas passed them on May 23. These amendments put in place FSAP recommendations concerning corporate governance ("fit-and-proper" test), consumer rights and auditing until two new laws, the law on Insurance Activity and the law on Insurance Contracts, are approved by Seimas in early 2003.
Fiscal Structural Reforms
9. Stabilizing the tax revenue-to-GDP ratio remains a government priority, in order to ensure medium-term fiscal sustainability. To this end, the tax reforms that are needed to ensure compliance with EU requirements and to modernize the tax system are intended to be revenue neutral. The government is finalizing its tax reform package, following approval by Seimas of new CIT and VAT laws in December 2001 and January 2002, respectively. The new draft PIT law, submitted to Seimas in May, includes a 33 percent rate on all types of income (with the exception of a few items, such as royalties, which will be subject to a 15 percent rate). An increase in the tax exempt minimum (TEM) under the PIT from the current LTL 250 per month is also planned for 2003. The new law will eliminate most exemptions, including for prizes and winnings and for capital gains on sales of securities. On June 1, 2002, new requirements for accounting and record-keeping for better control of patents were introduced, and the list of activities for which patents may be granted will be shortened via the new PIT as of 2003. In order to fulfill the government's objective of revenue neutrality of the tax reform, any revenue loss of the new PIT (estimated at LTL 280 million for 2003) and the new VAT (a loss of LTL 58 million in 2003) will be offset by expected gains from the CIT (LTL 140 million) and the new real estate tax law will expand the current tax base to property owned by individuals (LTL 70 million, see paragraph 10). Moreover, the new CIT law will be amended to return the declaration date from October 2003 to May 2003 (an additional LTL 90 million in 2003) and the TEM of the PIT will be adjusted only to the extent that overall revenue neutrality of the package is ensured. Efforts to improve tax administration will also continue with expected gains of LTL 40 million.
10. Despite the efforts of recent months, municipal finances suffer from fundamental weaknesses of chronic underfinancing, lax financial discipline and a large overhang of overdue payables, as evidenced by the increase of arrears of LTL 38 million during the first quarter of 2002. If not addressed, these weaknesses could eventually threaten macroeconomic stability. First, revenue needs to be stabilized at an adequate level. While recent reforms have ensured the appropriate and equitable financing of delegated functions, own revenue sources need to be enhanced. To this end, a number of local fees were increased by Seimas in April, including fees for the installation of equipment, and the Government will submit to Seimas by end-September a draft law for the extension of the real estate tax to individual property (benchmark for the third review). Under the new draft law, municipal councils will be granted the right to set tax rates (with a minimal homestead deduction), and the government will urge municipalities to strictly refrain from granting exemptions. The new property tax should be structured so as to yield at least LTL 70 million in 2003. Given that the PIT remains the major source of municipal finance, the government will ensure that the loss of revenue on account of the envisaged PIT reform will not exceed what can be reasonably raised through the property tax and the other tax measures described in paragraph 9. Second, to streamline spending, municipalities will undertake an expenditure review along the lines proposed by the World Bank study with concrete rationalization proposals for the 2003 budget. Third, in order to strengthen financial discipline, the central government will not support external borrowing by municipalities or an increase of borrowing limits. Finally, to tackle the large stock of existing payables, the government will approve by end-September additional measures to be implemented in 2002, including (i) submission to Seimas of amendments to the law on the State and Municipalities Budgets of 2002 to make the additional transfers for clearance of arrears conditional on the reduction of the stock of arrears, following the schedule submitted by municipalities (benchmark for end-September); (ii) monthly publication in the mass media of the arrears position of all municipalities; (iii) approval by the government of a decree to provide internal or external loans or to grant guarantees on loans only to municipalities complying with the debt limits and constantly reducing their arrears.
11. The government has undertaken a number of significant steps to improve the financial position of the HIF and intends to implement additional measures in 2002. Despite a weakening in January-February, the HIF's financial performance started to stabilize in March-April as some of the expenditure measures began to take effect. The measures recently introduced include: (i) reduction of the list of illnesses the treatment costs of which are fully compensated; (ii) reduction in the margins for wholesalers and retailers of compensated medications (in May); (iii) introduction of patient's medication registration certificates (in June) to improve control; and (iv) introduction of limits on prescribed medications by doctors. The government plans to introduce additional measures in 2002, including: (i) reduction of the list of most expensive compensated medications; (ii) conclusion of negotiations with health service providers on prescription limits; and (iii) approval of procedures for the computation of basic prices of compensated medications. The implementation of all measures (with total savings of 0.2 percent of GDP for this year) will allow the HIF's budget to be balanced in 2002 without accumulation of new arrears.
12. The government is committed to ensuring a sound and viable pension system. A pension reform plan, incorporating a voluntary second pillar based on supplementary matching government contributions and tax incentives, was endorsed by Seimas in May 2002. A government working group will incorporate Seimas recommendations and work out technical details in a final plan that will be submitted to Seimas by end-October for final consideration during the fall 2002 session. The new plan will start to be implemented as of January 1, 2004.
Other Structural Reforms
13. The government is continuing its efforts to strengthen the bankruptcy process and to improve the business environment. The new bankruptcy law that came into force in July 2001 has allowed for an increase of the number of cases and streamlining of bankruptcy procedures. New bankruptcy procedures will be proposed to Seimas by end-September 2002, to ensure full compatibility with the new civil process code. Also by end-September, the bankruptcy law will be amended to strengthen the process for appointing bankruptcy administrators, in order to lessen pressures from major creditors. A new manual on bankruptcy procedures is expected to be adopted by the Ministry of Economy by end-2002.
14. The government remains committed to reducing unemployment further, through enhanced labor market flexibility and well-targeted training opportunities. A new labor code, expected to be passed in June 2002, will introduce flexibility in the setting of the minimum wage, with provisions for lower minimum wages for specific groups, certain classes of unskilled workers and possibly certain regions. Laws on Workers' Councils and on Lockouts will be proposed to Seimas by end-2002. The Unemployment Insurance Law, which strengthens the insurance element in the payment of unemployment assistance, will be submitted to Seimas in the second half of 2002. In addition, the Government is committed to improving the social safety net. Thus, the law on Social Assistance in Cash, which will be submitted to Seimas by end-June 2002, will change eligibility norms by introducing greater means testing, as well as introduce additional social assistance to the long-term unemployed.
15. The government is committed to developing an efficient and competitive energy sector. Shortly after the closing of the sale of the first 34 percent stake in Lithuanian Gas (LG) to a consortium of Ruhrgas and E.on by end-June 2002, the government will announce an international tender for the sale of a second 34 percent stake to gas suppliers. Closure of the second share sale is targeted for end-2002. Tender procedures for the privatization of the two Lithuanian Power Company successor distribution companies will begin in the fourth quarter of 2002, after a nine-month period of pilot operations. Privatization is expected to be completed by the end of the second quarter of 2003. A ten-year oil supply-share sale arrangement for Mazeikiu Nafta (MN) was initialed with Yukos in April; this arrangement should facilitate a major modernization and expansion of MN's refinery. The government is reviewing the proposed deal, with a view to strictly limiting financial contributions or guarantees to the remaining US$118 million arising from the 1999 privatization agreement.
16. One of the key structural objectives of the government is to complete its privatization program. Advisors for the privatization of Lithuanian Airlines (LA) have prepared a timeline for privatization, with a tender for a 49 percent stake in LA to be announced this fall, with closure targeted for the first quarter of 2003. In the financial sector, the sale of the Import-Export Insurance Company is planned for later this year, and the sale of the National Stock Exchange for 2003. In transportation, two shipping firms remain to be sold; a tender for advisory services on the sale should be closed in July, with sale in 2003. Four large state-owned alcohol producers are to be sold during the first half of 2003. The Ministry of Transport and Communications has engaged advisors for the reorganization and eventual privatization of Lithuanian Railways.
17. Significant progress has been made on accession negotiations with the EU. The government has completed 28 of 31 chapters so far and aims to close the remaining chapters (Agriculture, Energy, Financial and Budgetary Provisions, Regional Policy and Other) by the end of the year, with a view to joining the EU in 2004. Some outstanding issues remain; in particular the government is seeking support from the EU to help defray the estimated costs of closing the Ignalina Nuclear Power Station.
III. Program Issues and Monitoring
18. The program will continue to be monitored on the basis of quarterly quantitative performance criteria and benchmarks and a set of structural policy benchmarks for end-June 2002, end-September 2002, and end-December 2002 consistent with the revised economic program (specified in the attached tables), and the third review by the IMF Executive Board. The definitions of the program targets are provided in the Technical Memorandum of Understanding (Annex). The third review will be based on end-September 2002 outcomes, and will focus on the 2003 budget, measures to improve municipal finances, as well as the recommendations of the Data and Fiscal Transparency Reports on the Observance of Standards and Codes (ROSCs) and is expected to be completed by December 2002.
1. This Memorandum defines variables that constitute quantitative performance criteria and benchmarks for the stand-by arrangement and sets out the reporting requirements for the government and the Bank of Lithuania.
I. Performance Criteria on the Operation of the Currency Board Arrangement
Maintenance of exchange rate under currency arrangement
2. The present exchange rate of LTL 3.4528 per €1 will be maintained throughout the period of the program. The currency of the peg was changed on February 2, 2002. In this connection, all performance criteria related to the currency board arrangementwere adjusted accordingly at the time of the repegging.
Cover for currency board arrangement
3. The Bank of Lithuania will ensure the maintenance of not less than 100 percent foreign reserve backing for the Bank of Lithuania's liabilities, as defined in paragraph 4 below under the currency board arrangement for the duration of the stand-by arrangement.
4. Foreign reserves backing will consist of the gross foreign reserves of the Bank of Lithuania, as defined in paragraph 10, expressed in Litai at the official exchange rates of the Bank of Lithuania. The Bank of Lithuania's Litai liabilities under the currency board arrangement comprise:
Required reserves of the banking system
5. Average reserve deposits of the banking system over each required reserve holding period established by the Bank of Lithuania (running from the 24th of one month to the 23rd of the next month) shall not be permitted to be below required reserve deposits of the banking system, as defined in paragraph 6, by more than 2 percentage points of eligible liabilities, as defined in paragraph 6.
6. All banks will be required to hold reserve deposits on account with the Bank of Lithuania of not less than 6 percent of their domestic and foreign currency deposit liabilities. Together, these shall constitute the required reserve deposits of the banking system. The deposit aggregates against which required reserves of the banking system shall be calculated will be referred to as "eligible liabilities," as defined in the March 14, 2002 Resolution No. 38 of the Board of the Bank of Lithuania ("Regulations on Reserve Requirements for Credit Institutions"). Average reserve deposits of the banking system for each reserve maintenance period will be calculated at the end of each holding period as a percentage of eligible commercial bank liabilities.
7. The Bank of Lithuania will extend new credits to banks only and in amounts that do not violate (i) the performance criterion requiring full foreign currency backing for currency board liabilities or (ii) the performance criterion specifying the minimum targets for net international reserves.
Performance criterion on floor on net foreign exchange coverage of the currency board arrangement
8. International reserve assets and liabilities shall be valued in euros using the Bank of Lithuania's official rates prevailing at each test date. For the period of the program, monetary gold will be valued at market prices according to BoL internal guidelines.
9. Net foreign exchange coverage of the currency board arrangement is defined as:
(i) gross foreign reserves of the Bank of Lithuania, less foreign reserve liabilities;
(i) foreign currency-denominated liabilities of the Bank of Lithuania to domestic residents and privatization proceeds of the government held in the Bank of Lithuania; and
(ii) Litai liabilities of the Bank of Lithuania, as defined in paragraph 4, under the currency board arrangement, less deposits withdrawn through deposit auctions and any central bank bills.1
10. Gross foreign reserves of the Bank of Lithuania shall be defined as:
(i) monetary gold holdings;
(ii) holdings of SDRs;
(iii) reserve position in the IMF; and
(iv) holdings of foreign exchange in convertible currencies by the Bank of Lithuania.
11. Excluded from gross foreign reserves are:
(i) capital subscriptions to foreign financial institutions;
(ii) long-term nonfinancial assets of the Bank of Lithuania;
(iii) convertible currency-denominated claims on domestic banks;
(iv) assets in nonconvertible currencies; and
(v) foreign assets pledged as collateral or otherwise encumbered.
12. Fund staff will be informed of details of any gold sales, purchases, or swap and derivative operations during the program period, and any resulting changes in the level of gross foreign reserves that arise from revaluation of gold carried out according to the accounting practice of the Bank of Lithuania will be excluded from gross reserves as measured herein.
13. Foreign currency-denominated reserve liabilities of the Bank of Lithuania shall be defined as:
(i) the Bank of Lithuania's convertible foreign currency liabilities to nonresidents, with an original maturity of up to and including one year;
(ii) the outstanding use of Fund credit.
14. Excluded from foreign reserve liabilities are any liabilities arising from balance of payments support loans of maturity longer than one year, including such loans from the EU, the BIS or other international financial institutions, foreign governments or foreign banks.
15. Foreign currency-denominated liabilities to domestic residents shall include convertible currency deposits of the general government, and liabilities to banks and non-bank financial institutions, including deposits under the reserve requirement. Bank of Lithuania Litai liabilities under the currency board arrangement are defined in paragraph 4.
II. Performance Criteria on General Government Fiscal Balance, Guarantees for Domestic Borrowing, and Arrears
16. The general government encompasses the national government (comprising the state and municipal governments) and the extrabudgetary funds. The extrabudgetary funds include the Social Insurance Fund (SoDra), Health Insurance Fund, Privatization Fund, Road Fund, Ignalina Closure and Decommissioning Fund, and any other extra-budgetary operations. The central government is defined as the general government excluding municipalities.
17. The general government deficit is determined on a cash basis.
18. The ceiling on the general government deficit is subject to two adjusters: for faster-than-projected implementation of net lending operations and for faster-than-projected implementation of investment projects by budgetary organizations and appropriation managers.
19. For the purpose of assessing the observance of the ceilings on the general government fiscal balance, the program targets will be adjusted upwards by the amount actually disbursed and on-lent under already committed foreign loans from International Financial Institutions (including the World Bank, the EBRD, the EIB, and the NIB) and other sources of financing as specified in Table 2 are higher than the amounts assumed under the program with a 50 percent implementation rate of the total annual commitment.
20. The implementation of general government investment projects carried out by budgetary organizations and appropriation managers, including but not limited to the Ministry of Defense, is specified in Table 3 on a quarterly institution-by-institution basis. The performance criterion on the fiscal deficit will be adjusted by the amount equal to the excess of the actual appropriations over the programmed cumulative quarterly amount for every project, assuming a 50 percent implementation rate of the total annual commitment. The adjusted amount for every project for each test date shall not exceed the annual appropriation for each project based on a 100 percent implementation rate.
21. General government guarantees on domestic borrowing include all guarantee commitments for (i) borrowing in domestic currency from residents and nonresidents and (ii) borrowing in foreign currency issued for the Agricultural Marketing Agency and the Export and Import Credit Insurance Agency (Table 4).
22. Outstanding payment obligations of the general government include all identified obligations incurred by the state government, municipalities, SoDra, the Health Insurance Fund, and other extrabudgetary funds as covered by the definition of general government provided above. Outstanding payment obligations are defined as delayed payments for deliveries of goods and services when a bill has been received but not paid after 45 days. For wages and salaries, and pensions, outstanding payment obligations are defined to exist when payments are delayed by more than 7 days. Outstanding payments obligations of the central government are defined as outstanding payments obligations of the general government minus outstanding payments obligations of the municipalities outside the general government (Table 5).
III. Performance Criteria on External Debt
Ceiling on contracting or guaranteeing of external debt (i.e., debt denominated in foreign currency) with original maturities of more than one year by the public sector with a sub-ceiling on external debt with original maturities of longer than one year and including five years.
23. For purposes of this performance criterion, the public sector comprises: (i) general government (as defined in paragraph 16), (ii) the Bank of Lithuania, and (iii) other agencies on behalf of the general government (Table 6). This performance criterion applies not only to debt as defined in point No. 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt adopted by the Executive Board on August 24, 2000 (Decision No. 12274-(00/85) but also to commitments contracted or guaranteed for which value has not been received. Excluded from the limits are use of IMF resources, guarantees of foreign currency-denominated borrowing of the Agricultural Marketing Agency and the Export and Import Credit Insurance Agency covered in paragraph 21, and foreign currency direct borrowing and guarantee by the municipalities from resident banks which are not guaranteed by the central government. Included are other than IMF balance of payments support from official creditors.
Ceiling on the outstanding stock of external debt (i.e., debt denominated in foreign currency) with original maturities of up to and including one year owed or guaranteed by the public sector.
24. For purposes of this performance criterion, the public sector excludes the Bank of Lithuania. The term debt has the meaning set forth in point No. 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt adopted on August 24, 2000 by the Executive Board (Decision No. 12274-(00/85). Excluded are normal import-related credits, liabilities on the correspondent accounts with central banks of the BRO (Baltics, Russia, and other countries of the former Soviet Union) countries, guarantees of foreign currency-denominated borrowing of the Agricultural Marketing Agency and the Export and Import Credit Insurance Agency covered under paragraph 21, and foreign currency direct borrowing and guarantee by the municipalities from resident banks which are not guaranteed by the central government.
25. The general government will not accumulate external payments arrears on any expenditure item or external debt as defined paragraph 23-24. Transactions subject to the ceilings specified in Section III shall be valued in the contracted currency and converted into U.S. dollars at the time the loan agreement is entered into at the exchange rate for the end of the month.
26. The authorities will provide the IMF with information needed to monitor the implementation of the program on a regular basis and in accordance with the timetable indicated below. Fund staff will review together with the authorities the data reporting on an ongoing basis and revise the reporting whenever necessary.
Information on money and banking
27. On a monthly basis, the Bank of Lithuania will provide information on:
28. In line with SDDS requirements, the data on international reserves of the Bank of Lithuania will be provided to the Fund on the 5th working day after the end of the month at the latest; the balance sheet of the Bank of Lithuania will be provided to the Fund on the 10th working day after the end of the month at the latest throughout the program period in the agreed format. The other data referred to in paragraph 27 will be provided to the Fund on the 18th working day after the end of each month at the latest throughout the program period in the agreed format.
General government budget implementation and financing
29. On a monthly basis, the Ministry of Finance will provide information on:
30. These data will be reported to the Fund within 30 days after the end of each month throughout the program period in the agreed format.
31. On a quarterly basis, the Ministry of Finance will provide information on:
32. For the state government, these data will be reported to the Fund within 30 days after the end of the quarter throughout the program period in the agreed format. Data for municipalities will be reported to the Fund within 90 days after the end of the quarter throughout the program period in the agreed format.
Information on the External Sector
33. On an monthly basis, the Ministry of Finance and the Bank of Lithuania will provide information on:3
34. These data will be reported to the Fund within 30 days after the end of each month throughout the program period in the agreed format.
35. The above reporting requirements will be assessed on an ongoing basis, and may be revised at the initiative of the Fund and with the consent of the government and the Bank of Lithuania.
June 13, 2002
1The Single Treasury System will remain outside the Bank of Lithuania during the program period.
2Outstanding payment obligations of municipalities will be reported on a quarterly basis.
3The Ministry of Finance will provide data on public debt and the Bank of Lithuania will report data on private debt.
4Information on registered private sector loans will be provided on a monthly basis, actual figures for the external debt stock of the private sector will be reported on a quarterly basis.