The International Monetary Fund (IMF) continues to play the dominant role in providing financial support for the balance of payments of post-communist and developing countries. The fund has the dual role of providing such support and of encouraging economic reform by attaching stringent conditions to its loans.

In 1997 the IMF approved new credits for Albania, Armenia (actually, the second annual loan under a threeyear facility), Azerbaijan, Bulgaria, Croatia, Estonia, Georgia (an identical situation to Armenia's), Kyrgyzstan, Latvia, Macedonia, Mongolia, Romania, Tajikistan, and Ukraine.

Among the transition countries not listed, some - including Kazakhstan, Lithuania, Moldova, and Russia - attempted during the year to qualify for the release of tranches under existing loans. The Visegrad countries have had sufficiently strong private capital inflows not to rely on the IMF for balance-of-payments support, although Hungary was awarded a two-year loan in March 1996, which it has not drawn upon.

The IMF suspended lending in1995 to Belarus and Uzbekistan out of dissatisfaction with their weak reform efforts, in the latter case citing the restrictive foreign exchange regime introduced that year. Two further striking cases are Federal Yugoslavia and Turkmenistan. The former has been under UN sanctions and is not yet a member of the IMF; the latter is a member, but has not been sufficiently reformist to quality for support.

Bulgaria and Romania won large new loans in April (in this endnote, all agreements are dated based on when hey received approval from the IMF's Executive Board), as new, reformist governments vowed to put their predecessors' sluggishness behind them. The Bulgarian loan is supposed to provide $657 million over 14 months, while the Romanian one is slated to provide $414 million over 13 months. Subsequently, the fund pronounced itself satisfied with Bulgarian economic policy, and released additional loan tranches in July, August, and December.

Romania's relations with the fund in1997 were problematic, however. In the summer the IMF criticized the size of the budget deficit, continuing high inflation, and price controls on energy and food products. It was especially concerned about the slow pace of liquidation and privatization of state enterprises, prompting the government to announce in August the closure of 17 enterprises. That move led to the Fund's releasing of the second tranche in September.

The IMF remains concerned about slow privatization and high inflation in Romania. However, a privatization decree issued on 21 December, if passed by parliament in February, may help convince it to release the next tranche in early 1998.

Albania received $12 million from the IMF in November for "emergency post-conflict assistance." In August, the IMF HAD set as conditions for renewed lending that the authorities close the remaining pyramid schemes, privatize or liquidate two of three state banks, reform the civil service, create an agricultural land market, improve tax collection, raise tax rates, and cut government spending. Agreement was held up until November by legal problems involving the closure of the pyramids. Tajikistan received a similar, $10 million, loan in December.

At the other end of the spectrum are Estonia and Latvia, which both received standby loans late in 1997 - worth $22 million and $45 million, respectively - which they do not intend at present to draw upon.

Relations between the IMF and Croatia made headlines in an unusual way in1997. Under pressure from the United States, the fund in July refused to release a $40 million loan tranche. The U.S. cited Zagreb's balking at releasing war criminals to the Hague. Those individuals were apprehended and dispatched to the Netherlands in October, and the IMF approved the release of the money, but Croatia then decided it did not need the funds after all.

Russia and Ukraine, two of the IMF's biggest borrowers, experienced ups and downs in their relations with it IN 1997. In October, the fund, citing poor tax collection, announced that it would not release a $700 million tranche of a loan to Russia until early 1998. However, an IMF mission in December recommended releasing it, citing progress in that area.

Ukraine received a one-year, $542 million standby loan in August. That is not as good news as it seems, since Kyiv and the IMF had been negotiating over a $2.9 billion, three-year loan, but in the end the fund decided that reform progress had been insufficient.

Relations with the IMF mirror the overall direction of transition
economies. Relations remain on track between the fund and the
Transcaucasian states, even though Georgia and Azerbaijan were slow starters on reform. In contrast, the IMF, citing problems with
privatization, energy pricing, and the budget deficit, postponed from June until July releasing one loan tranche to Moldova (an early CIS reformer); it then delayed until early 1998 releasing the next one.

KUCHMA: UKRAINE TO PROMOTE SMALL BUSINESS. President Leonid Kuchma told a Kyiv conference on 27 December that he intends to issue a decree in the near future that will help to promote small business in Ukraine, Interfax reported on 29 December. He said that he would simplify registration procedures, taxation, and reporting to government agencies. And Kuchma added that he had directed the Ukrainian government to deregulate most business activities within 30 days. PG

UKRAINIAN POPULATION CONTINUES TO DECLINE. As a result of rising death rates and falling birth rates, the population of Ukraine declined by approximately 400,000 people in 1997, the State Statistics Committee announced on 26 December. The country's population now stands at 50.48 million, down from 50.85 million a year ago. PG