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Macroeconomy remains stable, IMF renews program

December 23, 2010

Year in Review

This year’s modest 3 percent economic growth, driven mostly by exports, helped Nicaragua maintain solid macroeconomic finances in 2010, allowing the International Monetary Fund (IMF) to approve the government’s final program revisions in November and extend its financial assistance program through 2011.

Though inflation is slightly above this year’s goal of 7 percent, as of mid December it appeared that inflation numbers would remain in the single digits for the year.

Exports grew 37 percent in 2010 and were expected to reach $1.9 billion by year’s end. Foreign-reserve levels remained stable at $1.6 billion.

Nicaragua’s free-trade zone sector also demonstrated strong recovery this year, and is expected to reach 88,000 jobs by next year. Investment is also recovering, expected to close the year at $500 million in foreign direct investment (slightly shy of the country’s 2008 pre-economic crisis record).

However, there are still some doubts being raised about the Sandinistas’ management of the economy.

Economists worry that the government, despite its socialist claims, is not investing enough in education and health, which will receive .5 percent less funding in next year’s budget.

The IMF is also demanding the government open its books on Venezuelan aid, which totals $1.44 billion since 2007. Of that amount, only $436 million is stipulated as donations.

The IMF and opposition economists worry the aid is in the form of secretive loans, and next government could get stuck with a huge bill from Venezuela.

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