U.S. Treasury Undersecretary Lawrence Summers advises that the IMF should consider creating a new fund that would respond quickly to financial crises such as the one in Mexico. Establishing some sort of "lender of last resort" capability at the Fund to respond to future crises would be a key issue for the world's top industrialized countries in the coming months, according to Summers. To prepare for the future, IMF Managing Director Michel Camdessus has asked the IMF Executive Board to authorize a formal investigation into the possibility of a capital increase. Early indications are that Camdessus may want as much as a doubling of the IMF's $220 billion capital. The special drawing rights (SDR) issue will be discussed at a meeting of the Interim Committee. Under a modified proposal, 16 billion SDRs (about $24.6 billion) would be allocated to the world's poorest countries and to 37 IMF members that have not received any allocation. An additional 20 billion SDRs ($28 billion) would be used to create a special contingency fund for Mexico-style emergencies, to be disbursed under clear conditionality. Camdessus said the proposal would be part of a package including either increasing IMF quotas to strengthen the IMF's capital base, or expanding the General Arrangements to Borrow.

IMF Approves Loan to Ukraine

The International Monetary Fund approved on 7 April a $1.96 billion credit package to Ukraine including a $1.46 billion standby credit, and a $392 million second tranche of the systemic transformation facility (STF). Donors at the World Bank-sponsored 21 March meeting in Paris pledged further financing this year. Speaking of a "new social contract," World Bank Vice President Wilfried Thalwitz announced aN $850 million loan package to help Ukraine's efforts to finance a 1995 external payments deficit of $5.5 billion. The country's national output during the 1990s dropped by nearly 50 percent.

IMF Standby to Russia Approved

Russia's 1995 economic program, if fully implemented, will achieve macroeconomic stabilization and accelerate structural reform according to IMF Managing Director Michel Camdessus. His comments came after the Executive Board approved a $6.8 billion standby credit for Russia to support the government's 1995 economic program. Its key objectives: to bring inflation down to an average monthly rate of 1 percent in the second half of the year, via a major tightening of monetary policy and a substantial cut in the fiscal deficit (halving it to 6 percent of GDP from nearly 11 percent in 1994); and to accelerate structural reforms, including measures to liberalize the trade regime and the oil sector. (Domestic wholesale oil prices should increase from around $40 per ton at end-1994 to $65-$70 per ton by the end of 1995.) The program envisages a decline in real GDP of 9 percent this year , compared with 15 percent in 1994.

Finance Minister Vladimir Panskov said in an interview with Trud that the budget deficit so far this year had been kept to about half of planned levels, a result that would help reduce inflation. Monthly inflation is expected to be 6 to 8 percent in March, down from 11 percent in Feb-ruary and 18 percent in January, and it will likely be 5 percent a month in April and May. Panskov said the deficit for the first two months of this year was 6 trillion rubles, or 8 percent of the 73 trillion rubles targeted for the whole of 1995.

Facelift for Russia's Housing

A $400 million World Bank loan approved will help the Russian government create a private land and housing market. A housing program of $758 million will leverage private investment in small-scale construction industries, help local governments sell public land to private developers and families, and stimulate the development of a real estate market. This project plans 22,000 apartments, 8,200 townhouses, and 1,000 houses to be built in St. Petersburg, Tver, Novgorod, Niznij Novgorod, and Barnaul, as well as in Moscow.

Streamlining Russia's Tax Collection

Russia is reforming its tax system, which must be improved to keep up with increasing private sector activity. Millions more profit tax and value added tax returns are being filed. A $16 million World Bank loan will help the country modernize tax administration in two key regions, with better procedures, automation, and training. The project, which will improve the national tax service is further supported by $9.7 million from the Russian government and $0.9 million from the IMF.

IFC Invests in Russian Paper Mill

A group of investors, led by the World Bank's International Finance Corporation (IFC) and Herlitz International Trading, a subsidiary of the German paper and stationery retailers, have invested in the recently privatized AO Volga, one of the largest paper mills and newsprint manufacturers in Russia, in Nizhny Novgorod province. The $150 million deal, including $86 million that the IFC will mobilize directly, aims to turn the mill into one of the most competitive in the region. The remaining $64 million of the financing package is in the form of equity participation of outside investors and funds generated by the improved performance of the company. To date, the IFC has approved 14 investments (including AO Volga), in Russia's capital markets, energy, and telecommunications sectors, for a total of $261.5 million.

Cleanup Loan to Russia

The World Bank and the European Bank for Reconstruction and Development are offering Russia up to $100 million in loans to finance an international cleanup of last year's Komineft pipeline spill. The loans would pay for repair of the oil pipeline and removal of the estimated 100,000 metric tons of spilled oil. The sums are contingent on Russia agreeing to put up $12 million to $15 million to begin the work immediately. Komineft, the Russian oil company whose pipeline was responsible for the spill, has approved an international partnership to begin the cleanup.

World Bank President: James Wolfensohn

The World Bank's Board of Executive Directors unanimously selected James Wolfensohn to become the institution's ninth president. Wolfensohn will assume the presidency succeeding Lewis Preston who is retiring because of ill health. Wolfensohn, 61, is an international investment banker who founded his own firm in 1981. Since 1990, he has been chairman of the Board of Trustees of the John F. Kennedy Center for the Performing Arts in Washington, D.C. He is director of both the Business Council for Sustainable Development and CBS, Inc., and chairman of the Institute for Advanced Study at Princeton University.

World Bank and IMF Support Azerbaijan

The World Bank is to grant a total of about $150 million in four credits to Azerbaijan until June 30 1996, the end of the 1995 fiscal year. A credit of $20.8 million will be used to develop the country's oil industry, and $20.0 million will support creation of a market infrastructure. A rehabilitation loan of $60 million to $70 million will cover part of the country's budget deficit. Financing of an investment project to upgrade Baku's water supply system will come to $45 million. The country is to receive the first half of an $80 million IMF systemic transformation facility credit during April to support price liberalization, accelerated privatization, and inflation reduction. The IMF credit will be used mainly to stabilize Albania's currency, the manat, and to cover the budget deficit, set at 4.7 percent of GDP for 1995.

Donor Meetings in Paris: Pledge of $780 Million to Mozambique...

With the completion of the peace agreement and the success of the first multiparty election, Mozambique's eighth Consultative Group meeting in Paris was a watershed, with donors pledging about $780 million in credits and grants to the country. The Group focused on the reforms proposed by the government to consolidate peace, revitalize the economy, and reduce poverty. The draft budget presented to the meeting provides for a 14.6 percent cut in defense spending, a 40 percent increase in teachers' wages, and a 21.9 percent increase in health providers' wages.

...$1,350 Million to Cambodia...

Donor countries meeting in Paris pledged $1.35 billion to Cambodia for 1995 and 1996. The donors urged the Cambodian government to restore law and order and institute economic and social reforms. Negotiations were concluded with the World Bank for a $20 million credit agreement to support a social and economic redevelopment project.

...$1 Billion to Tanzania...

Donors pledged at least $1 billion in new aid commitments to Tanzania for 1996, provided reforms can be accelerated. Members of the Consultative Group for Tanzania praised the country's progress in instituting structural reforms, although tax evasion and tax exemptions contributed to the recent higher-than-expected fiscal deficits; government representatives announced new measures to collect taxes and investigate corruption.

...and $290 Million to Moldova

Commitments made at the March 20 meeting of the Moldova Consultative Group should cover the country's 1995 financing requirements of $290 million. Donors noted that inflation has been reduced dramatically, with rapid liberalization of both prices and external trade. The balance of the economy is shifting to the private sector. The IMF has approved a $90 million standby credit arrangement with Moldova supporting government economic reforms that aim at real economic growth of 1.5 percent in 1995, and at keeping the budget deficit below 3.5 percent of GDP and the annual inflation rate at 10 percent. The World Bank approved a $30 million standby loan for Moldova's Guarantee Administration Unit (GAU); the nongovernmental agency will sell guarantees to qualified overseas investors against risks of government performance and political force majeure.

Fueling China's Energy Development

The World Bank has approved more than $1 billion in loans to support three projects in China, two in the energy sector and one to promote productivity-enhancing technologies. The power development transmission projects in Zhejiang (with a loan of $400 million) and Sichuan ($270 million) provinces will increase the supply of electricity in two of China's most industrialized and populous regions. The third loan, for $200 million, will help China adopt clean, productivity-enhancing technologies for industry.

World Bank Loans to Romania

Armenia Gets IDA Loan

The International Development Association on February 28 approved a $60 million credit to back Armenia's economic reform program. The credit will supply Armenia with much-needed foreign exchange for the purchase of critical imports. It will also help strengthen the social safety net for the poor, and it will serve as a catalyst to raise financial support from other donors.

Money Pours in to Uzbekistan

A $160 million World Bank rehabilitation loan approved on March 28 will help accelerate Uzbekistan's structural reform program. The loan will finance imports and provide foreign exchange, helping the government make the transition to a market-based economy. The loan will bolster Uzbekistan's new currency and provide a framework for donor support. Earlier, a $32 million World Bank loan was approved to try to save the Aral Sea, a once-huge saltwater lake that has been so drained and polluted that it is in danger of drying up completely. International experts have been invited to find corrective solutions. Another $70 million from the World Bank will help develop the country's cotton farming. The international donor community, meeting in Paris in March, pledged more than $900 million for Uzbekistan for 1995. Japan and France have agreed to a total of $200 million in trade insurance for an Uzbekistan refinery project.

IDA Upgrades Nicaragua's Public Services

The International Development Association has approved a total of $57 million in credits to Nicaragua. Despite privatizing more than 300 public enterprises and cutting the number of public workers, Nicaragua's public sector still accounts for 40 percent of GDP and is a drag on private sector growth. A $23 million credit will back the government's plans for broad reform of up to 20 ministries and agencies, improvement of public services, and reduction of public spending. A credit of $34 million will boost basic education in Nicaragua, especially in the poorest areas. It will help decentralize school administration, provide textbooks, expand preprimary school programs and rebuild dilapidated schools, including basic sanitation services. Nicaraguan Presidency Minister Antonio Lacayo said the Paris Club has agreed to write off $500 million-$600 million of Nicaragua's foreign debt as a first step in the renegotiation of the country's total foreign debt of $11.7 billion.

Croatia Reschedules