March 19 (Reuters) - Central and Eastern European countries
have embarked on spending cuts, that include reducing state
wages and pensions, and other measures as part of conditions of
bailout packages from the IMF.
Analysts say in some cases, the moves may spark public
unrest that could lead to governments in the region losing
elections or being forced out of office, but they said any
upheaval will most likely be more subdued than the deadly riots
that broke out in some countries during the Asian crisis.
Following are some key details of conditions attached on IMF
rescue packages for various countries:
* BELARUS -- In January, Belarus agreed with the IMF
recommendation for a 20 percent devaluation of the Belarussian
rouble and tied the currency to a basket of currencies made up
of the dollar, euro and Russian rouble.
-- The IMF said the devaluation, together with accompanying
wage restraint and the right fiscal and monetary policy, would
set the stage for an improvement in the current account.
-- Belarus has already received the first $788 million
tranche of a $2.5 billion IMF credit approved late last year.
* HUNGARY -- The IMF, the EU and World Bank agreed a $25.1
billion rescue package last November in the biggest loan for an
emerging market economy since the crisis began.
-- The IMF's conditions forced the government to make
additional spending cuts, including in social spending and
public sector wages, which had been regarded as taboo so far.
-- To reduce Hungary's large public debt the government has
targeted a fiscal deficit in 2009 of about 2.5 percent of GDP.
-- The measures to reduce government expenditure include
wage freezes and the suspension of a 13th-month salary bonus for
public servants in 2009.
* ICELAND -- The IMF approved a $2.1 billion loan for
Iceland in November as part of a $10 billion package.
-- Iceland's central bank hiked interest rates by six
percentage points to a record 18 percent in October as a
condition for receiving the aid.
-- A decision on the IMF deal was delayed until Iceland
agreed to sort out wrangles with Britain and the Netherlands
over obligations to foreign depositors in failed bank
Landsbanki.
-- Last week the IMF said stringent controls on the flow of
capital, put in place to stabilise the island nation's currency,
needed to be retained for the time being.
* LATVIA -- Latvia was forced to seek a 7.5 billion euro
($10.11 billion) rescue from the IMF, EU and other lenders in
December last year. The deal allowed Latvia to keep its currency
pegged to the euro but at a cost of painful adjustments in other
areas to drive down real wages and lower budget spending.
-- Latvia also agreed to keep its budget deficit in 2009
below 5.0 percent of gross domestic product and to bring it to
3.0 percent of GDP in 2011.
-- As well as financial sector measures, Latvia is cutting
public sector salaries by 15 percent in 2009 and raising tax
rates to boost its coffers. Other steps to boost the stability
of the financial sector included capital injections by the
banks, a revamped insolvency law and improved supervision,
according to a letter the government sent to the IMF.
* SERBIA -- Serbia started talks with the IMF on Monday for
a two-year loan worth 3 billion euros. The Fund had already
approved a stand-by loan in January, and its terms required that
Serbia cut its budget deficit to 1.75 percent of GDP in 2009,
from 2.7 percent in 2008.
* TURKEY -- The Turkish government wants to sort out
differences with the IMF on a major loan deal after talks were
suspended in January. The previous $10 billion stand-by accord
expired in May, and Turkey has said it will only sign a deal
with the IMF if it serves the country's interests, and that it
would not agree to the IMF's standard belt-tightening policies.
* UKRAINE -- Ukraine's parliament on Tuesday met credit
conditions imposed by the IMF by altering provisions of the 2009
budget giving the government leverage over the central bank.
-- The IMF approved a $16.4 billion loan package in November
last year, but suspended the credit's second tranche due to
concerns over the size of the country's proposed budget deficit.
CRITICISMS:
ARGENTIA -- Argentina blames the fund for helping set the
stage for the country's 2001-02 economic meltdown, which
prompted a massive debt default and devaluation of the local
peso currency. It complains the conditions the IMF imposed on
its loans were partly responsible for causing the crisis.
-- Argentina used central bank reserves to pay off its debt
to the IMF in 2006, seeking independence from the lender. The
IMF has not done a routine annual review of Argentina since.
-- Argentina has said it will push for changing IMF lending
practices and increasing the voting power of emerging market
economies, at the April 2 meeting of the Group of 20 countries.
MALAYSIA -- Malaysia led a chorus of criticism from Asia of
the way the IMF diagnosed and managed Asia's 1997 financial
crisis. It rejected IMF medicine in pulling itself out the
crisis, preferring home-grown remedies including a dollar peg
for its ringgit currency and the imposition of wide-ranging
capital and dealing controls.
-- The then Prime Minister Mahathir Mohamad hit out at the
IMF and World Bank as being in thrall to rich nations and their
multinational corporations.
RUSSIA -- Russia bears a grudge against the IMF, which
provided advice for many ill-fated market reforms in the 1990s.
Source: Reuters;
