Costa Rica : economic stabilization and recovery program V

The cash transfer will be disbursed in three installments in order to maintain a rational flow of foreign exchange and preserve the Mission"s leverage in negotiating the conditionality attached to the program. The GOCR will agree to conditions precedent and covenants regarding: (1) policy and structural reform (including, inter alia, continued adjustment of the foreign exchange rate, expansion of private sector credit, and more stringent restrictions on public sector credit); (2) continuation of the process of divesting the subsidiaries of the Costa Rican Development Corporation (CODESA), which was begun under Economic Stabilization and Recovery (ESR) Program IV; and (3) creation of a centralized secondary mortgage bank and improvements in urban planning and housing strategy formulation. Economic Support Funds will be used to finance private-sector imports of U.S. raw materials, intermediate goods, construction materials, capital equipment, and spare parts. An equivalent amount of local currency will be deposited by the GOCR in a special account and used to fund, inter alia, assistance for the CODESA divestiture, an addition to the Special Credit Line (supported in earlier ESR agreements) for the productive private sector, and initial funding of the secondary mortgage bank. Amendment of 8/86 increases total funding to $150,582,000 and adds new conditionality related to: (1) GOCR performance on selected economic stabilization actions during the remainder of 1986; (2) development and acceptance by A.I.D. of an economic stabilization plan for 1987; and (3) submission of legislation and approval of new Central Bank regulations aimed at improving the overall efficiency of the financial sector and strengthening the position of private banks. (PD-AAU-539)