CONFIDENTIAL
11
granted the same terms as Argentina, as they had originally demanded.
Latest
This
ind tors show that real GDP rose by 5.8% in Q1 1987 compared with Q1 1986.
suggests that the official target of between 6% and 7% growth in 1987 may be met.
Eastern Europe
27 On 17 June the Paris Club took a small step towards reaching an interim
agreement with Poland. Official creditors expressed their readiness to conclude a
re-rescheduling agreement covering all outstanding arrears and payments falling due
up to end-March 1988, on two conditions: that interest due from 1 April 1987 under
the 1981 agreement be kept current, and that arrears accrued up to 31 March 1987
under that agreement (totalling some $550 mn) be settled in two stages, 50% on
signature and 50% by 31 December 1987 at the latest. The Poles were informed of
these moves in July, and a reply is now awaited. In the Paris Club on 21 July the
US declared its readiness to reschedule all debt under all agreements falling due to
end 1988, thereby perhaps hoping to put off any decision on IMF lending until after
the Presidential election and aiming to pre-empt the banks in obtaining some money
from the Poles. The Poles informed the banks early in June that they would be
unable to meet in full the repayments due in June, September and December under
their 1981 and 1982 agreements (as amended in September 1986). Faced with the
choice of 5% repayments in each quarter (rather than 20% of which three-quarters
would automatically be added to the revolving short-term facility) or just the June
20% (with no increase in short-term exposure and no repayments in September and
December), the banks reluctantly opted for the latter.
28
The second stage of Yugoslavia's official MYRA was finally agreed by the Paris
Club on 17 June. It has been made clear that governments' willingness to consider
a third stage (April to December 1988) will depend on the satisfactory
implementation of the measures referred to in the May "letters of intent" (and any
subsequent action which proves necessary) and on a clean bill of health from the
Fund under its enhanced surveillance, particularly in the areas of interest and
exchange rates, wages and prices policy and the budget deficit. (The latest Fund
mission was in Belgrade from 22 June to 2 July.) On 5 June the BIS reported that
the National Bank of Yugoslavia had made an approach for a $250-300 mn 3-6 month
bridging loan, citing temporary cash-flow difficulties and proposing to 'bridge' to
seasonal foreign exchange inflows in H2 and expected IBRD and EIB disbursements.
The initial BIS reaction rejecting this approach in the absence of a prospective IMF
standby or IBRD SAL was confirmed by the BIS board at its meeting on 14 July. It
is not at all clear that the difficulties are merely seasonal; the Fund staff
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