Nicaragua : economic stabilization and recovery II

The funds will be used to: (1) help clear arrearages to the World Bank and the Inter-American Development Bank (IDB); (2) finance private sector imports from the United States and Central America; (3) and finance petroleum imports from A.I.D. Geographic Code 941 countries, the Netherlands Antilles, and Curacao. Conditionality will require the GON to: (1) establish monetary and fiscal controls; (2) license privately owned financial intermediaries as a way of restructuring the financial system; (3) allow private operators to participate in foreign trade activities that are currently state monopolies; and (4) establish a regulatory framework for the privatization of state-owned enterprises. In addition, the GON will covenant to: (1) provide, over a 3-year period, the equivalent of $5 million to help defray USAID/N operating expenses; (2) ensure adequate expansion of real credit to the private sector, in part through private financieras and/or banks; and (3) seek alternative financing for petroleum imports, with the understanding that no more than $45 million of program funds may be used for this purpose. Due to Nicaragua"s hyperinflationary economy, no local currencies other than that for the Mission operating fund will be generated under this program. Grant amendment of 1/21/91 adds conditionality requiring the GON to: (1) achieve the fiscal and monetary targets set forth in the economic plan submitted to the Paris Consultative Group on 12/3/90; and (2) reduce public sector employment by 15,000 over 6 months. (PD-ABM-161)