The National Bank of Croatia would like to express its regret at the news received from the International Monetary Fund. Namely, the Executive Board of the International Monetary Fund concluded at its Wednesday meeting that the discussion about the expected approval for the use of the second credit tranche under the three-year Extended Arrangement with Croatia, which was approved in March, should be continued by the end of July. Since the Croatian macroeconomic stability and economic growth are well founded and do not depend on loans for liquid international reserves, the latest decision made by the Executive Board of the International Monetary Fund can not have a crucial influence on Croatian economy. Hence, this decision shall in no way induce changes in the main orientation of Croatian monetary and overall economic policy. The targets Croatia achieved in the stabilization and development process were not a result of requirements set by international financial institutions, but a reflection of the commitment of the Croatian Government and the National Bank of Croatia to carry out policies leading to improvement and development of Croatian economy.

The decision made by the Executive Board of the International Monetary Fund is unusual, and from economic standpoint, difficult to explain, especially taking into consideration the fact that the first program review, which was conducted by an IMF Mission in May, confirmed that the Republic of Croatia adhered to the policies agreed on. The review showed that, as forecasted, the required performance criteria and structural benchmarks of the Extended Arrangement were observed, and only one of them (ceiling on net credit to selected enterprises) was not observed. However, the aforementioned ceiling was exceeded to rather minor extent, so that this could on no account put to the question the orientation of Croatian economic and financial policy. In other words, no feature of the Croatian economic framework was a barrier to successful continuation of an exceptionally correct cooperation between the International Monetary Fund and our country under the aforementioned arrangement. This statement may be supported by the fact that the management and the staff of the IMF, as well as a large number of executive directors agreed on the approval for the use of the second credit tranche, without any conditioning or delay.

The National Bank of Croatia does not dispute that in the process of attaining stabilization and development goals set by every country, and by Croatia as well, a successful cooperation with the most important international financial institutions is desirable and useful. However, two crucial notions are our own perceptions of goals and the political will to choose the right way leading to the realization of these goals, that is, to sound and sustainable growth, increased effectiveness, competitiveness and, finally, to the integration of the Croatian economy in the global economy. This statement may be supported by two facts: firstly, the Republic of Croatia prepared the ground for the introduction of the stabilization program and implemented the aforementioned program in October 1993; secondly, most important results defined under the stabilization program had been achieved exactly a year before the Republic of Croatia made arrangements for financial support with international financial institutions.

In spite of the latest decision made by the Executive Board of the International Monetary Fund, we firmly believe that strong kuna, stable prices, financial discipline, rehabilitation of the banking system and the open market are basic preconditions which have to be met, so that we may achieve sound and sustainable economic growth, as well as the lasting growth of prosperity in our country. This would mean that the most important goals, which have to be considered when crucial decisions on all levels are made, remain the same. We also believe that in near future it shall be possible for the IMF and the World Bank to continue providing the Republic of Croatia with further support in the process of continuous cooperation between our country and these two international institutions.