## Press Release: IMF Approves US$39 Million Stand-By Credit for Estonia

_IMF News, March 1, 2000_

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## Bibliographic details
- Published: March 1, 2000

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### IMF arrangement and terms
- IMF approved an 18-month stand-by credit for Estonia in an amount equivalent to SDR 29.34 million (about US$39 million) to support the government's 2000-2001 economic program.
- Estonia will treat the stand-by credit as precautionary and does not intend to draw on it.
- Estonia joined the IMF on May 26, 1992, and its quota is SDR 65.2 million (about US$87 million).
- Estonia's outstanding use of IMF financing currently totals SDR 17 million (about US$23 million).

### Executive Board statement (Shigemitsu Sugisaki)
- Authorities committed to a comprehensive and well-balanced program for maintaining macroeconomic stability and completing structural reforms to support recovery and medium-term sustained growth while safeguarding the external position.
- The program is precautionary; Estonia has not used Fund resources under three earlier arrangements.
- Key policy components highlighted:
  - Phase out discretionary fiscal stimulus provided in 1999.
  - Target a fiscal deficit of 1¼ percent for 2000.
  - Reduce the size of government expenditures relative to GDP over time; general government expenditures to remain broadly frozen in real terms in 2000, including keeping pensions and public sector wages broadly unchanged after large increases in 1999.
  - Strict adherence to the currency board arrangement as the cornerstone of policy.
  - Continue sound fiscal policy, safeguard financial sector stability, continue structural reforms, maintain labor market flexibility, and adopt a cautious approach to foreign borrowing.
  - Strengthen banking system through consolidation, enhanced supervision, foreign investor participation, and strengthened bank management.
  - Complete structural reforms to meet all EU accession requirements by early 2003, focusing on public administration, the pension system, privatization of remaining large infrastructure state enterprises, and addressing oil-shale mining and electricity generation issues.

### Macroeconomic outlook and projections
- Context:
  - Estonia suffered a steep downturn after the August 1998 Russian crisis; growth resumed in the second half of 1999 and appears to be accelerating.
  - The downturn sharply cut the current account deficit by contracting private sector demand.
- Growth projections (as stated in the text):
  - Real GDP growth is expected to accelerate to about 4% in 2000 and to about 6% in 2001, from negative levels in 1999.
- Tabled real GDP growth (year-on-year in percent):
  - 1996: 3.9
  - 1997: 10.6
  - 1998: 4.0
  - 1999: -1.3
  - 2000: 6.0
- Inflation and monetary policy:
  - Authorities do not target inflation rates under the currency board arrangement.
  - Forecasted moderate increase in both CPI and GDP inflation due to recovery and increases in indirect taxes.
  - Bank of Estonia to continue adhering to currency board requirements and abstain from providing credit to government or banking system; Bank of Estonia does not set interest rates nor aim at credit or money supply targets.
  - Recent recovery of broad money growth viewed as healthy.

### Fiscal policy objectives and measures
- Fiscal targets:
  - Reduce budget deficit to 1.25% of GDP in 2000.
  - Eliminate the deficit altogether in 2001.
  - From a deficit of 4.8% of GDP in 1999.
- Key elements of the 2000 budget:
  - Hold on pensions and public sector wages.
  - Abolition of the corporate profit tax.
  - Compensating increases in other taxes.

### Structural reform agenda
- Estonia remains a leader among transition countries in the pace of structural reforms.
- Program's structural reform priorities:
  - Privatization and restructuring of the few remaining major infrastructure firms.
  - Improved supervision over financial markets through eventual introduction of a unified supervision agency.
  - Reform of public administration.
  - Reform in pension and health areas.
  - Legal and institutional reforms driven by objective of meeting all European Union accession requirements by January 1, 2003.

### Financial sector and external position
- Banking sector:
  - Material strengthening via consolidation, enhanced supervision, foreign investor capital and liquidity support, and strengthened bank management.
- External and reserve indicators (selected):
  - Gross international reserves (In millions of U.S. dollars):
    - 1996: 640
    - 1997: 760
    - 1998: 815
    - 1999: 856
    - 2000: 858
    - 2001: 918
  - Trade balance (in millions of U.S. dollars):
    - 1996: -1,021
    - 1997: -1,128
    - 1998: -1,117
    - 1999: -770
    - 2000: -803
    - 2001: -928
  - Exports (in millions of U.S. dollars):
    - 1996: 1,814
    - 1997: 2,297
    - 1998: 2,684
    - 1999: 2,467
    - 2000: 2,576
    - 2001: 2,824
  - Imports (in millions of U.S. dollars):
    - 1996: -2,834
    - 1997: -3,426
    - 1998: -3,801
    - 1999: -3,237
    - 2000: -3,379
    - 2001: -3,752
  - Current account (in millions of U.S. dollars):
    - 1996: -399
    - 1997: -563
    - 1998: -480
    - 1999: -209
    - 2000: -285
    - 2001: -343
  - Gross external debt/GDP (in percent):
    - 1996: 25.5
    - 1997: 46.8
    - 1998: 45.1
    - 1999: 39.3
    - 2000: 34.6
  - Net external debt/GDP (in percent):
    - 1996: 33.1
    - 1997: 33.3
    - 1998: 30.8

### Selected macroeconomic indicators (high-level)
- Nominal GDP (in millions of kroons):
  - 1996: 52,446
  - 1997: 64,324
  - 1998: 73,213
  - 1999: 74,310
  - 2000: 80,036
  - 2001: 87,115
- GDP (in millions of U.S. dollars):
  - 1996: 4,357
  - 1997: 4,637
  - 1998: 5,209
  - 1999: 5,055
  - 2000: ...
- Average CPI (year-on-year change in percent) 1/ 2/:
  - 1996: 23.1
  - 1997: 11.2
  - 1998: 8.2
  - 1999: 3.3
  - 2000: 4.6
  - 2001: 3.0
- 12-month CPI (end-of-period change in percent) 1/ 2/:
  - 1996: 14.8
  - 1997: 12.5
  - 1998: 4.4
  - 1999: 4.8
  - 2000: 2.4
- GDP deflator (year-on-year change in percent):
  - 1996: 24.0
  - 1997: 10.9
  - 1998: 9.4
  - 1999: 2.9
  - 2000: 3.5
  - 2001: 2.7
- Average monthly wage (end-of-period, in U.S. dollars):
  - 1996: 291
  - 1997: 318
  - 1998: 360
  - 1999: 347
  - 2000: 377
  - 2001: 412

*Source: Press Release: IMF Approves US$39 Million Stand-By Credit for Estonia (March 1, 2000).*

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## References

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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr0014_