CONFIDENTIAL
XX
growth has not risen by as much as might have been expected given the liberalisation
programme. Only the first tranche ($83 mn), of the BIS/US Treasury bridging
facility of $250 mn was used, and it has been repaid. The Federal authorities are
currently seeking to push through a number of supposedly wide-ranging and
market-oriented reforms. Although the immediate effect of the reforms is likely to
be limited, they mark an intellectual break with the past and could lead to
important systemic changes. Fund Staff are to return to Belgrade again in December.
Hungary
68 The SBA mid-term review suggests that the economy remains more or less on
|target. The reshuffled Government under the new Prime Minister Nemeth has
undertaken to push forward with market-oriented reform and shows greater signs of
being prepared to tackle some of the more fundamental underlying problems of
industrial reform (including the prospect of 150,000-200,000 job losses).
mission has just returned to Budapest to consult and advise.
A Fund
Romania
69 Agreement has been reached for the full repayment of the $1 bn of commercial
bank debt still outstanding by end-June 1989 25% by mid-November and the balance
in 8 equal monthly instalments. President Ceaucescu, in a speech to the Central
Committee Plenary on 28-30 November, reaffirmed his belief in the central role of
the Communist Party in all fields, including the economy.
USSR
70 Recent months have seen a spate of Western bank credit offers (mostly
government-backed) to the concern of the more hard-line members of the US
administration, Congress and media. The DM 3 bn FRG facility announced in May, and
finalised during Kohl's visit to Moscow in October, has been followed by offers of
ECU 680 mn from Italy, £l bn from a consortium of UK banks, DF1 500 mn from the
Netherlands and F Fcs 12 bn from France. US worries that such credits constitute a
threat to Western security (because they could be diverted to the military sector or
mean that defence spending need not be reduced so much) are without real
foundation.
-
Not only are the amounts involved $5-6 bn over a number of years
minute compared with estimated annual defence spending of $400-500 bn, but also the
credits are all tied to funding the development of the ailing agricultural, consumer
goods and services sectors. In any case, the Soviet Union has historically been a
No comments yet.
Private notes are available after approval.