Meetings at the Ministry of Finance and the Croatian National Bank held on Friday, July 27, 2001 marked the beginning of the visit of the International Monetary Fund Mission to Croatia. The five-member Mission headed by Mr. Hans Flickenschild will be spending two weeks in Croatia during which it will meet with the representatives of the Croatian government and relevant Croatian institutions to discuss issues related to the stand-by arrangement approved by the IMF to Croatia in the spring 2001.

In the introductory meeting with the CNB Governor, Dr. Željko Rohatinski, and other CNB officials, members of the IMF Mission were briefed on the activities taken by the CNB in order to fulfill the obligations assumed under the stand-by arrangement, and on the efforts to be made for that purpose in the coming period.

Governor Rohatinski pointed out three changes in the monetary policy instruments: the reduction of the reserve requirement rate from 23.5 percent to 22 percent, the extension of the calculation base for foreign currency reserve requirement and the introduction of monthly auctions of CNB bills. In addition, the repo agreement has been standardized. The draft Law on the National Payment System, adopted by the Croatian government yesterday, and the draft Banking Law, to be forwarded under standard procedure next week, have been prepared. Preparations of the new Foreign Exchange Law have also been intensified. Governor Rohatinski said that monetary developments are in line with the projection, and added that the CNB international reserves rose by about USD 500 million due to this year's larger foreign currency inflows and the CNB's efforts to prevent further appreciation of the exchange rate. However, the effects of the CNB's foreign currency interventions were offset by the issuance of CNB bills, and as a result, the reserve money movements stayed within the framework set up by the projection. Governor Rohatinski stressed again that the CNB will continue its efforts to ease the appreciation pressures on the exchange rate without jeopardizing its primary objective of price stability.

Mr. Flickenschild, head of the IMF Mission, said that data made available to the IMF on the CNB's fulfillment of obligations under the stand-by arrangement indicate that the Croatian monetary authorities have overperformed on the criteria concerning the central bank, and that he expects that such performance will be continued.

During their stay in Croatia, members of the IMF Mission will meet with the officials of the Croatian Ministry of the Economy, Ministry of Health, Ministry of Labor and Social Welfare, Croatian Parliament, State Agency for Deposit Insurance and Bank Rehabilitation, Croatian Privatization Fund, with the officials of other government bodies, as well as with representatives of several large Croatian banks.