Press Release No. 08/147

Press Release: Statement of the IMF Mission to Nicaragua

June 23, 2008

An IMF mission, led by Luis Cubeddu, visited Managua during June 9-20 to continue discussions of the first review of the Poverty Reduction and Growth Facility (PRGF) arrangement. The mission met with the government authorities, deputies of the National Assembly, representatives of the private sector and civil society, as well as members of the budget support group. The following statement was released by Mr. Cubeddu:

"Discussions were open and productive. The performance of the Nicaraguan economy remains generally positive, although there are growing challenges from a deteriorating global outlook, notably rising prices of oil and other commodities. Global commodity price increases have had a significant impact on inflation in Nicaragua, and the government has implemented a number of measures to contain these pressures, including stimulus to agricultural production and protection of affected sectors, as well as the continued implementation of prudent macroeconomic policies.

"Important advances have been made in the renegotiation of bonds held by banks, and it is expected that soon a durable solution will be reached to continue safeguarding the stability of the financial system. The government is also in the process of improving the information on official external aid flows to both the public and private sectors, which it plans to make public. This will facilitate the reflection of these inflows in fiscal and external accounts for the purposes of macroeconomic analysis, and enhance overall transparency.

"There has also been significant progress in the implementation of the structural reform agenda. The National Assembly approved a law deterring the illegal consumption of electricity and an agreement was reached with the distribution company to improve service provision and general financial stability of the sector. In addition, the government has continued working on an action plan to strengthen public financial management, and the National Development Plan is about to be finalized, including its consultation and consensus-building with civil society.

"In the coming weeks, discussions will continue to resolve outstanding issues. As soon as these discussions are finalized, documents for completion of the first review under the PRGF arrangement will be presented to the IMF Board for its consideration."