TNAG-1942-FCO40-2768-Internal-economic-situation-in-Hong-Kong-1989 — Page 105

CONFIDENTIAL

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57

Provisional data show a January-May trade surplus of $23 mn (cf a small deficit

in the 1987 period). Inflation continues to rise and reached a 12 month rate of

20.7% in July.

The fiscal deficit so far this year is larger than targeted.

Guyana

58 Although a minor debtor, Guyana has become the first major test case for the new

co-operative approach to the arrears problem agreed by the Interim Committee in

September. As part of a rapprochement with the IFIs, a Policy Framework Paper was

approved by both the Fund and Bank Boards in July. The medium-term outlook is made

difficult by the need to close a large financing gap even after rescheduling.

Extensive discussions have been taking place between the IFIs and creditor

governments since August but little progress has been made; an inconclusive donors'

meeting was held on 7 November. A "support group" has been established, with

Canada in the chair, and hopes to have finalised a financing package by

mid-January.

-

However, a number of issues eg whether there should be retroactive

access to ESAF, the length of the shadow programme, the sequencing of clearance of

arrears to IFIS remain outstanding. The continuing delay in reaching a

settlement with the IMF is causing political difficulties for Predient Hoyte. His

Prime Minister and main political rival within the PNP, Hamilton Green, stands to

benefit politically if Hoyte fails in his attempts to restructure the economy.

Trinidad

The

59 Trinidad is in the process of its first rescheduling of public sector debts and

its first use of Fund resources. A further devaluation is expected soon.

Banks' Advisory Group (led by Bank of Tokyo) has agreed to reschedule most

maturities due September 1988 - August 1992 (about $440 mn), over 12 years 4 1/2

grace at LIBOR +15/16%. (A rescheduling of Paris Club debts will be discussed in

January.) The Fund Board approved a CCFF for SDR85 mn on 18 November;

and a

Letter of Intent has been sent as the basis for an SBA request for SDR 99 mn.

SOUTH AND EAST ASIA

Philippines

60

The Philippines has begun a fresh round of negotiations with the banks and IMF

and has asked for new money totalling $3.11 bn over 3 years from 1988 to 1990.

Both sides are currently considering their positions and another meeting will

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