IMF Program Still Uncertain

MANAGUA – If Nicaragua is unable to remain in thegood graces of the International Monetary Fund (IMF), thecountry will risk losing foreign-investment confidence,according to the government’s top-ranking economicauthorities.“In a small, vulnerable and impoverished economy likeNicaragua’s, a program with the IMF is a very importantconsideration for investors,” Finance Minister MarioArana told The Nica Times this week. “There is a verytight connection between the IMF program and the foreigninvestment climate here.”“The IMF stamp of quality is very important to the foreigninvestor,” added Mario Alonso, president ofNicaragua’s Central Bank.THE two Cabinet members are referring toNicaragua’s IMF economic program, which was renegotiatedwith the international lending institution in December2003, after having been suspended during the administrationof ex-President Arnoldo Alemán (1996-2002).For Arana, Nicaragua’s reacceptance into the IMF programmarked a turning point for the country.“One can see a clear relation between the moment theIMF program started, and when foreign investment reallystarted to develop more vigorously in Nicaragua,” theFinance Minister said. “That is when we became the second-ranked country in Central America for investment,growing at rates over 60% during the past two years, andwe become a country with one of the highest-growing ratesof foreign investment in all Latin America.”President Bolaños reports that 250,000 jobs have been created since he took office three yearsago, and an average of one free-trade zonehas opened each month of his term.However, all these macroeconomicgrowth indicators could be at risk if theIMF pulls out of Nicaragua and givesinvestors more reasons to worry about thecountry’s stability, the President’s economicteam warns.THE economic program was frozenlast October, due, in great part, toCongress’ approval of a budget that surpassedthe 3.2% fiscal-deficit amountagreed to with the IMF by $650 million insocial-spending increases.Nicaragua now has until next monthto convince the IMF to defrost, or it riskslosing some $175 million for the annualbudget, which is roughly $1 billion.President Bolaños and his Cabinetclaim they have taken the necessary stepsto abide by the IMF’s structural-adjustrequirements. The holdup, they argue, isin Congress.MINISTER Arana says there is acocktail of legislation that needs to beapproved by the legislative NationalAssembly for Nicaragua to move towardcompliance with the IMF’s structuraladjustment programs, aimed at macroeconomicstability.Included among those laws are: theLaw of Financial Administration, whichregulates public spending; the BudgetLaw, which establishes a fixed fiscal deficitlevel of 3.2%; the Law to Reformthe Pension System, and several billsaimed at strengthening the national bankingsystem.President Bolaños last week presentedthe bills to Congress for a second time,urging lawmakers to take the issue seriously.ARANA also stressed the importanceof passing the National Tax Code, whichhas been sitting in Congress for severalyears. Nicaragua, he said, is the onlycountry in the Western Hemisphere withouta tax code.Further complicating the issue, Aranaadded, are unresolved problems in thetransportation sector, the energy crisis andthe new Social Security reforms, whichwill increase the fiscal deficit by $35.9million during the first year alone (NT,April 29, May 20, June 3).“It is going to be nearly impossible todo all this by August,” Arana admitted.“Time has gotten the best of us.”THE Finance Minister stressed thatthe Executive Branch is doing everythingin its power to remain within the structureof the IMF program, and now the ball ison Congress’s side of the net.Bolaños said that he recently wentbefore the IMF “on bended knee forNicaragua,” pleading for continuedinclusion in the program.But without the cooperation of thepolitical parties, the President’s kneelingcould be for naught.“It’s not enough that the ExecutiveBranch reaches an agreement with theIMF and other sectors of society,” Aranasaid. “The problem is that this issue hasbecome a mechanism of pressure used inthe inter-institutional crisis inNicaragua.”SANDINISTA leader Daniel Ortegaremains unsympathetic to the President’scourting of the IMF.“Let ‘em go,” he said.The President, meanwhile, is tellingNicaraguans whom to blame in advance:“If we don’t get this, you’ll know who isresponsible.”