Front Matter

Front Matter Page

© 2003 International Monetary Fund

February 2003

IMF Country Report No. 03/27

Republic of Croatia: Request for Stand-By Arrangement—Staff Report; Staff Statement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for the Republic of Croatia

In the context of the request for Stand-By Arrangement, the following documents have been released and are included in this package:

  • the staff report for the request for Stand-By Arrangement, prepared by a staff team of the IMF, following discussions that ended on December 11, 2002, with the officials of the Republic of Croatia on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on January 14, 2003. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.

  • a staff statement of February 3, 2003 updating information on recent developments.

  • a Press Release summarizing the views of the Executive Board as expressed during its February 3, 2002 discussion of the staff report that completed the request.

  • a statement by the Executive Director for the Republic of Croatia.

The document(s) listed below have been or will be separately released.

Letter of Intent sent to the IMF by the authorities of the Republic of Croatia*

Memorandum of Economic and Financial Policies by the authorities of the Republic of Croatia*

*May also be included in Staff Report

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.

To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to

Copies of this report are available to the public from

International Monetary Fund • Publication Services

700 19th Street, N.W. • Washington, D.C. 20431

Telephone: (202) 623-7430 • Telefax: (202) 623-7201

E-mail: • Internet:

Price: $15.00 a copy

International Monetary Fund

Washington, D.C.

Front Matter Page



Request for Stand-By Arrangement

Prepared by the European I and the Policy Development and Review Departments

(In consultation with other departments)

Approved by Carlo Cottarelli and Shigeo Kashiwagi

January 14, 2003

  • The government intends to carry forward its program of fiscal consolidation and economic reforms, supported by a new stand-by arrangement, in the runup to general elections likely to be held in the second half of 2003.

  • With stable prices and a manageable current account deficit, macroeconomic stability is threatencd in the medium term by the large fiscal deficit and a rising public debt ratio. At the same time, a high public expenditure ratio and delayed structural reforms are a drag on growth. While falling short of the objectives of the ambitious adjustment scenario discussed with the authorities during the 2002 Article IV consultation, the present program aims at making progress toward fiscal sustainability and higher, sustained rates of economic growth.

  • Under the program, GDP growth is expected to reach 4.2 percent, inflation to remain below 3 ½ percent, and the external current account deficit to remain close to 3 ½ percent of GDP. The programmed reduction of the fiscal deficit from an expected 6.2 percent of GDP in 2002 to 5.0 percent in 2003 is expected to stabilize the public debt ratio at around 57½ percent of GDP.

  • Access under the requested arrangement would be SDR 105.88 million (29.0 percent of quota) over a 14-month period. As the Croatian National Bank (CNB) has repurchased all Fund credit outstanding, access is sufficiently front-loaded to allow upper credit tranche conditionality and quarterly phasing. The authorities do not plan to make any purchases under the arrangement.

  • Stand-by discussions were held in two rounds during October/November and December 2002. Messrs. Flickenschild (head), Bonato, Konuki (all EUI), Dodzin (PDR), Mr. Norrcgaard (resident representative), and Ms. Stephens (administrative assistant) participated in one or both missions. Meetings were held with the Deputy Prime Ministers for economic and social affairs, the Ministers of Finance, the Economy, Defense, and Reconstruction and Public Works, the Governor of the CNB, the chairman of the parliamentary budget committee, heads of government agencies, and representatives of banks and economic research institutes. Mr. Courtney (World Bank) participated in some of the discussions.


  • I. Recent Economic Developments and Near-Term Outlook

  • II. The Authorities’ Strategy and Program for 2003

    • A. Fiscal Policy

    • B. Monetary and Exchange Rate Policy

    • C. Structural Reforms

    • D. Risks to the Program and External Financing

  • III. Design of the Proposed Stand-By Arrangement

    • A. Modalities of the Arrangement

    • B. Program Monitoring

    • C. Capacity to Repay the Fund and Safeguards Assessment

  • IV. Staff Appraisal

  • Text Tables

  • 1. Main Economic Indicators

  • 2. Fiscal Adjustment Program

  • Figures

  • 1. Real Sector Developments, 1996-2002

  • 2. Retail Price Inflation, 1996-2002

  • 3. Exchange Rate Developments, 1994-2002

  • 4. Money and Bank Credit, 2000-2002

  • 5. Public Debt Stock, 1997-2002

  • Tables

  • 1. Key Macroeconomic Indicators, 1999-2003

  • 2. GDP by Expenditure Category, 2000-2003

  • 3. Saving-Investment Balances, 1999-2007

  • 4. Balance of Payments, 1998-2003

  • 5. Consolidated General Government Fiscal Operations by Economic Category on an Accrual Basis, 1999-2003 (in percent of GDP)

  • 6. Consolidated General Government Fiscal Operations by Economic Category on an Accrual Basis, 2003 (HrK million)

  • 7. Monetary Accounts, 2000-2003

  • 8. External Financing Requirements, 2001-2007

  • 9. Indicators of External and Financial Vulnerability, 1998-2002

  • 10. Schedule of Purchases Under the Proposed Stand-By Arrangement

  • 11. Status of Prior Actions as of January 14, 2003

  • 12. Projected Payments to the Fund as of November 30, 2002 Under Obligations Repurchase Schedule

  • 13. Indicators of Capacity to Repay the Fund, 2002-2010

  • Appendices

  • I. Fund Relations

  • II. World Bank Relations

  • III. Statistical Issues

  • IV. Sustainability Analysis

  • Appendix Figure

  • 6. Sustainability Analysis—Baseline and Stress Testing Scenarios, 2002-2007

  • Appendix Tables

  • 14. Core Statistical Indicators

  • 15. Public Debt Sustainability Framework, 1997-2007

  • 16. External Sustainability Framework, 1997-2007

  • Attachment

  • 1. Letter of Intent and Memorandum of Economic and Financial Policies

Main Websites for Croatian Data

Data in this report reflect statistical information received by December 23, 2002.

More recent data can be obtained from the following internet sources:

Croatian Bureau of Statistics

Croatian National Bank

Ministry of Finance

Ministry of Economy

Information on Croatian economics statistics can be found at the Fund’s Special Data Dissemination Standard website.

Front Matter Page

February 3, 2003

Front Matter Page

Press Release No. 03/13


February 3, 2003

International Monetary Fund

Washington, D.C. 20431 USA

Front Matter Page

February 3, 2003