IMF Cuts Off Loans to Nicaragua

Arbulu Neira, representative of the International Monetary Fund (IMF) in Nicaragua, reported that the IMF had suspended a US$17 million loan for budget support, the World Bank had done the same with US$35 million loan, and that the Inter American Development Bank (IDB) had withheld US$15 million from their international reserves, due to the lack of an economic program agreement for 2005 between the government and the IMF. Neira explained that time is running short and the Nicaraguan government has not yet presented its proposal.

Some of the IMF conditions for a new economic program are the passage of certain laws, for example, a financial administration of budget expenditure law, a banking reform law, the introduction of a Tax Code, and a strategy to define the situation of the Savings and Pension System. According to Neira, the government has just two weeks to submit its proposal to the IMF. The directorate of the IMF would discuss this proposal in an August meeting. If the government fails to submit the proposal within two weeks it is likely that no economic program agreement will be reached with the IMF. This would mean that the government would not receive the millions of dollars in loans currently suspended by the three international financial organizations. On top of this bilateral aid including US$120 million from the European Union would also most likely be withheld. We don?t have anything good to say about the Bolaños government?s economic policies, which have used debt service savings from HIPC debt relief to protect bank profits against their domestic debt burden rather than for poverty alleviation as HIPC required. However, we oppose heavy-handed IMF imposition of neoliberal, free trade policies which only further impoverish countries like Nicaragua.