Croatian minister says IMF conclusions correspond to government targets

The messages of the International Monetary Fund (IMF) from the closing statement after an IMF delegation's visit correspond to what the government is saying: Croatia must achieve three crucial targets: fiscal consolidation, reforms and economic growth, Croatia's Deputy Prime Minister and Regional Development and EU Funds Minister Branko Grcic told a news conference.

Grcic said that during their regular visit to Croatia, the IMF mission members and Croatia's officials had not discussed any stand-by deal.

The delegation of the International Monetary Fund, that was on a visit to Croatia on 20-25 February, urges Zagreb to accelerate the implementation of a structural reforms programme which the IMF mission finds to be crucial to restart growth and fully benefit from EU accession and it also calls on Zagreb to continue with gradual fiscal consolidation, no matter how difficult it is.

The IMF delegation issued its concluding statement on findings of its mission earlier on Wednesday in which it welcomes recently announced public sector wage cuts and intended pension and health sector reforms as "steps in the right direction."

Grcic said that the mission's statement clearly pointed to the problems Croatia was facing in financing. Also the private sector is deleveraging and in such circumstances it is difficult to restart growth, he admitted.

We will have to find mechanisms to encourage credit activities and to partially compensate for risks in the banking sector through state guarantees which we are already offering new funds to entrepreneurs through programmes of the Croatian Bank for Reconstruction and Development and the HAMAG investment agency, the minister said.

Asked about the IMF statement about greeting the government's plans to raise the pension age to 67, Grcic said that the cabinet had not yet made a decision to this effect but this topic was being discussed as was the proposed Labor Law.

Some changes in the pension system will have to be made. In the event that the retirement age is raised to 67, this decision would not be able to go into force before 2017, Grcic explained.

Asked why some changes are being carried out slowly in Croatia, the minister said that when it came to reform processes, measures with far-reaching consequences could not be adopted overnight.

As for fiscal consolidation, decisions have been made more swiftly, resulting in the reduction of the deficit by 5 billion kuna, he said, adding, however, that it would be unrealistic to expect to reduce the deficit to 2.5% of GDP this year as recommended by the IMF.

The government is aware that the public debt is high, coming closer and closer to the level of 60% of GDP. At the same time the government is conducting austerity measures, being careful not to undermine economic growth. "We are constantly walking on the edge when it comes to the deficit, trying to curb it to the level required by fiscal consolidation, and on the other hand, trying to stimulate economic growth," he said.

(Hina)



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