Chapter

Appendix. Europe: IMF-Supported Arrangements1(As of April 12, 2011)

Author(s):
International Monetary Fund. European Dept.
Published Date:
May 2011
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CountryIMF Loan Size, Approval DateKey Objectives and Policy ActionsAdditional Information
Ukraine$16.4 billion Stand-by Arrangement, November 2008
  • Help the economy adjust to the new economic environment by allowing the exchange rate to float, aim to achieve a balanced budget in 2009, phase in energy tariff increases, and pursue an income policy that protects the population while slowing price increases.

  • Restore confidence and financial stability (recapitalizing viable banks and dealing promptly with banks with difficulties).

  • Protect vulnerable groups in society (an increase in targeted social spending to shield vulnerable groups).

November 2008 stand-by arrangement (SBA) was canceled and replaced by a new SBA with the new government in July 2010. Under the November 2008 SBA, $10.5 billion was disbursed.

The first review of the new SBA arrangement was completed in December 2010. The February 2011 mission as part of the second review found that the economy performed better than expected in 2010. (www.imf.org/external/country/UKR/index.htm)
$15.2 billion Stand-by Arrangement, July 2010
  • Restore confidence and fiscal sustainability by reducing the general government deficit to 2.5 percent of GDP by 2012 and setting public debt firmly on a downward path below 35 percent by 2015.

  • Initiate reforms to modernize the gas sector and phase out Naftogaz’s deficit, including through gas tariff increases and a price mechanism that depoliticizes price setting of public utilities.

  • Restore and safeguard banks’ soundness through completion of recapitalization plans by end-2010 and strengthened supervision.

  • Develop a more robust monetary policy framework focused on domestic price stability with greater exchange rate flexibility under a more independent National Bank of Ukraine.

Iceland$2.1 billion Stand-by Arrangement, November 2008
  • Contain the negative impact of the crisis by restoring confidence and stabilizing the exchange rate.

  • Promote a viable domestic banking sector and safeguard international financial relations by developing a comprehensive and collaborative strategy for bank restructuring.

  • Ensure medium-term fiscal sustainability by limiting the socialization of losses in the collapsed banks and implementing a multi-year fiscal consolidation program.

The fourth review was completed in January 2011. The February 2011 mission as part of the fifth review stated that the economy is recovering in 2011 and financial sector restructuring is moving forward. IMF staff is currently assessing the appropriate pace and timing for lifting capital controls. (www.imf.org/external/country/ISL/index.htm)
Latvia$2.4 billion(€1.7 billion)Stand-by Arrangement, December 2008
  • Take immediate measures to stem the loss of bank deposits and international reserves.

  • Take steps to restore confidence in the banking system in the medium term and to support private debt restructuring.

  • Adopt fiscal measures to limit the substantial widening in the budget deficit and prepare for early fulfillment of the Maastricht criteria in view of euro adoption.

  • Implement income policies and structural reforms that will rebuild competitiveness under the fixed exchange rate regime.

In addition to financial assistance from the IMF, the program is heavily supported by the EU and a number of European countries.

On completion of the second review in February 2010, the arrangement was extended to December 22, 2011.

The third review of the program was completed in July 2010.(www.imf.org/external/country/LVA/index.htm)
Serbia$0.5 billion Stand-by Arrangement, January 2009; augmented to $4.0 billion in May 2009
  • Tighten the fiscal stance in 2009–10: limit the 2009 general government deficit to 1¾ percent of GDP and adopt further fiscal consolidation in 2010. The tightening involves strict income policies for containing public sector wage and pension growth and a streamlining of non-priority recurrent spending, which helps create fiscal space to expand infrastructure investment.

  • Strengthen the inflation-targeting framework while maintaining a managed floating exchange rate regime.

Since the original program was designed in late 2008, Serbia’s external and financial environment deteriorated substantially. In response, the authorities (1) raised fiscal deficit targets for 2009–10 while taking additional fiscal measures, (2) received commitments from main foreign parent banks that they would roll over their commitments to Serbia and keep their subsidiaries capitalized, and (3) requested additional financial support from international financial institutions and the EU. On completion of the first review in May 2009, the arrangement was extended, and the total financing was augmented.

The seventh and final review was completed in April 2011. (www.imf.org/external/country/SRB/index.htm)
Romania$17.1 billion (€12.9 billion) Stand-by Arrangement, May 2009Cushion the effects of the sharp drop in private capital inflows while implementing policy measures to address the external and fiscal imbalances and to strengthen the financial sector:
  • Strengthen fiscal policy to reduce the government’s financing needs and improve long-term fiscal sustainability.

  • Maintain adequate capitalization of banks and liquidity in domestic financial markets.

  • Bring inflation within the central bank’s target.

A sizeable financial support is also received from the EU.

The seventh and final review was completed in March 2011. The authorities treated the associated tranche as precautionary.

With economic activity now stabilizing and the program having successfully ensured macroeconomic and financial stability under very difficult circumstances, the expiring SBA was replaced by a new 24-month precautionary SBA in the amount of $4.9 billion. The EU is also providing funds on a precautionary basis under the new program. (www.imf.org/external/country/ROU/index.htm)
$4.9 billion (€3.5 billion) Stand-by Arrangement, March 2011
  • Designed as a precautionary arrangement.

  • Focus on promoting growth and employment and maintaining financial and macroeconomic stability.

Poland$20.6 billion Flexible Credit Line, May 2009The Flexible Credit Line (FCL) is an instrument established for IMF member countries with very strong fundamentals, policies, and track records of implementation. Access to the FCL is not conditional on further performance criteria.The arrangement for Poland, which has been kept precautionary, has helped stabilize financial conditions there, leaving room for accommodative macroeconomic policies and improving access to market financing. (www.imf.org/external/country/POL/index.htm)
$20.4 billion Flexible Credit Line, July 2010July 2010 FCL serves as a successor arrangement to May 2009 FCL.
$30 billion Flexible Credit Line, January 2011July 2010 FCL was cancelled and replaced by a new 2-year FCL arrangement approved in January 2011.
Bosnia and Herzegovina$1.6 billion Stand-by Arrangement, July 2009Safeguarding the currency board arrangement by a determined implementation of fiscal, income, and financial sector policies:
  • Reduce the structural fiscal balance and bring public finances on a sustainable medium-term path.

  • Reestablish public wage restraint.

  • Support adequate liquidity and capitalization of banks.

The second and third reviews were completed in October 2010. The November 2010 mission as part of the fourth review stated that the program is broadly on track, with all performance criteria and structural benchmarks being observed.

Discussions will continue after the formation of a new government to complete this review. (www.imf.org/external/country/BIH/index.htm)
Moldova$0.6 billion Extended Credit Facility and Extended Fund Facility, January 2010
  • Reverse the structural fiscal deterioration that occurred in 2008–09 while safeguarding funds for public investment and priority social spending.

  • Keep inflation under control while rebuilding foreign reserves to cushion the economy from external shocks.

  • Ensure financial stability by enabling early detection of problems and strengthening the framework for bank rehabilitation and resolution.

  • Raise the economy’s potential through structural reforms.

  • To promote poverty reduction, the program sets a floor on priority social spending. Moreover, social assistance spending will be increased by 36 percent in 2010 relative to 2009 to support vulnerable households.

The second review was completed in April 2011. (www.imf.org/external/country/MDA/index.htm)
Kosovo$140 million Stand-by Arrangement, July 2010Achieving fiscal stabilization, while accommodating large infrastructure investments, and safeguarding financial sector stability:
  • Limit the overall budget deficits in 2010 to 3.4 percent of GDP by raising select excise taxes and by restraining current primary spending.

  • Bolster the government’s bank balances held with the Central Bank of Kosovo (CBK) to provide scope for emergency liquidity assistance (ELA), and provide the CBK with a mandate for ELA, and further strengthen the banking system.

  • Improve the financial position of the energy sector to limit its costs to the budget.

Kosovo became the 186th member of the IMF on June 29, 2009.

The March 2011 mission as part of the first review found that the economic recovery is on track amid robust growth and private sector credit. However, the review could not be concluded due to disagreement on the draft budget for 2011. (www.imf.org/external/country/UVK/index.htm)
Greece$39 billion (€30 billion) Stand-by Arrangement, May 2010
  • Restoring confidence and fiscal sustainability: substantial front-loaded fiscal effort to bolster confidence, regain market access, and put the debt-to-GDP ratio on a declining path from 2013.

  • Restoring competitiveness: the nominal wage and benefit cuts and structural reforms to reduce costs and improve price competitiveness. Improved transparency and a reduced role of the state in the economy.

  • Safeguarding financial sector stability: Establishment of a Financial Stability Fund (FSF) to deal with possible solvency pressures. Extension of government banking liquidity support facilities and ECB’s non-standard monetary policy measures.

IMF financial assistance of €30 billion is in parallel with bilateral financial support of €80 billion available from euro area partners. The total amount of €110 billion will cover the expected public financing gap during the program’s period.

The third review was completed in March 2011. (www.imf.org/external/country/GRC/index.htm)
Ireland$30.1 billion (€22.5 billion) Extended Fund Facility, December 2010Targeting vulnerabilities in the banking system and aiming to restore the prospect of growth:
  • Support banks to maintain higher capital adequacy standards.

  • Consolidate the fiscal balance in a fair manner.

  • Address remaining impediments that undermine competitiveness.

IMF financial assistance of €22.5 billion forms part of the substantial financial package amounting to €85 billion, of which the remaining funds comprise of supports from European partners and Ireland’s own contributions.

The first and second review will be combined and held after the new government has taken office. (www.imf.org/external/country/IRL/index.htm)
Macedonia$640 million Precautionary Credit Line, January 2011The Precautionary Credit Line (PCL) is a new IMF instrument established in the context of enhancing its lending tools to help provide effective crisis prevention. This is the first IMF’s commitment under PCL. The access to the credit line in the first year is up to $533 million.In March 2011, changed circumstances brought by the early elections, including a delay in the planned Eurobond issuance, led the authorities to draw $300 million under the PCL arrangement.

The PCL arrangement includes indicative targets on the fiscal deficit and on net international reserves. The first review is scheduled in July 2011. (www.imf.org/external/country/MKD/index.htm)

The main author of this appendix is Phakawa Jeasakul.

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