IMF Director Michel Camdessus.
The mission, led by Robert Feldman, was visiting Slovakia for the first time since April, and presented its findings on October 26 to the Parliamentary Budget, Finance and Currency Committee, as well as to Finance Minister Brigita Schmögnerová.
According to Finance Ministry spokesman Peter Švec, the report was generally positive, and singled out for special praise the government's second package of austerity measures, approved in May, as well as the cabinet's plan to restructure banks and industry.
The IMF credited the May austerity package with having helped stabilise the currency, and with having improved both Slovakia's fiscal and current account deficits. While approving of plans announced by the cabinet in September to restructure and then sell banks, as well as to amend the bankruptcy law and commercial code and restructure firms, the IMF urged that these plans be carried out as soon as possible, even at the cost of lowering the nation's standard of living.
The IMF also praised the government's decision to put a 51% stake in state telecom firm ST up for sale, but cautioned against using proceeds from such a sale as income for the state budget. Instead, the IMF said, it would like to see any such money from privatisation sales used to pay off loans incurred by state-owned bodies, such as Slovak Rail (ŽSR) or the Road Fund.
According to Feldman, the main goal of the IMF mission was to formulate an economic outlook for Slovakia in the year 2000. The main risks, he said, lay with the repayment of bonds issued by the FNM privatization agency which fall due within the next 12 months, as well as with increased demand for social benefits from cash-strapped social funds.
The IMF sees another problem in the low success rate of tax collection, and recommends that the lower rate of VAT tax be increased from 10% to 12%, while the upper band be cut from 23 to 22%. "The year 1999 will be difficult, much as next year, regarding the high unemployment rate. You will have to carry on with the programme of changes you launched," Feldman told Slovak politicians.
1. Nov 1999 at 0:00 | Tom Nicholson