News Brief No. 01/37

News Brief: IMF Completes the Second Review Under the Stand-by Arrangement for Lithuania

April 16, 2001

The Executive Board of the International Monetary Fund (IMF) today completed the second (and last) review of Lithuania's performance under a 15-month, SDR 61.8 million (about US$78 million) stand-by arrangement. This opens the way for a release of SDR 51.5 million (about US$65 million) from the arrangement, which the authorities, however, are not expected to request as they have treated the arrangement as precautionary so far.

In commenting on the Executive Board's decision to complete the review of Lithuania's economic program, Shigemitsu Sugisaki, Deputy Managing Director, stated:

"The Lithuanian authorities are to be commended for the successful implementation of their macroeconomic program that helped restore macroeconomic stability in 2000. The economic recovery is stronger than expected, although rising unemployment continues to pose concerns. In recent months, structural reforms have advanced in the areas of banking privatization, bankruptcy, and labor legislation, although progress has been mixed in the fiscal structural and energy sector areas. Significant progress has been made in negotiations for EU accession.

"The budget deficit target for 2001 approved by parliament in December of last year remains appropriate. The authorities' ongoing work on the preparation of a comprehensive medium-term fiscal framework is welcome. The effort to simplify and make the tax system more transparent is also an important positive step and will facilitate EU accession. The authorities need to coordinate tax and expenditure measures in such a way as to achieve their medium-term goal of a cyclically adjusted balanced budget. The authorities' intention to switch the peg of the litas to the euro, with a view to moving smoothly toward greater economic integration with the EU is also welcome. The authorities are urged to move ahead with structural reforms in the fiscal area, banking sector, energy sector, and measures to facilitate private activity," Sugisaki said.