India
CONFIDENTIAL
xix
64
India's external debt continues to warrant close attention. At end-March 1988
it was estimated to have reached $52.3 bn (including IMF lending and deposits with
Indian banks by non-resident Indians), up from $47.4 bn a year earlier, making it
the largest debtor in Asia. The debt service ratio during FY1987/88 also stood at
an uncomfortable 30.2%, although this was down from 31.8% a year earlier. Much of
the rise in the DSR stems from a bunching of heavy IMF repurchases, which will fall
from this fiscal year onwards.
EASTERN AND SOUTHERN EUROPE
Poland
65 While the new Prime Minister Rakowski shows some sign of trying to get to grips
with economic reform, particularly the need to cut back heavy industry these efforts
still fall far short of a coherent strategy and SBA new credits remain a distant
prospect. HMG has made it clear that further UK credits and any long term debt
rescheduling could not be considered before Poland has signed and adhered to an IMF
programme. Disbursement of IBRD loans also awaits a more convincing economic
Some progress towards signing Paris Club bilaterals has been made; the
Poles may have retreated a little from their tactic of demanding lower margins on
earlier agreements.
programme.
66 Poland has made an informal approach to the IMF for an SBA on the basis of its
still to be finalised Consolidation Plan. So far, there has been no formal
response from the Fund, although versions of the Consolidation Plan seen to date do
not constitute a sufficient basis for agreement.
Yugoslavia
67 The IMF mid-term review mission has been asked to approve the relaxation of some
of the SBA targets because inflation has now reached 236% (against an SBA target of
95%). Drawing of the third tranche of the SBA, conditional upon Board discussion
of the review, is now in doubt although Yugoslavia has no great need for it as the
current account, unlike the domestic economy, is for the moment reasonably strong:
the surplus in the first seven months of 1988 was $1.2 bn (cf $32 mn in the same
period last year). Exports including tourism have been buoyant, while import