Nicaragua : economic stabilization and recovery III

The program consists of a cash transfer of $135 million in ESF funds to be disbursed in four tranches. Program funds will be used in the following manner: up to $60 million for imports of petroleum, up to $20 million for imports of goods for the public sector, and the balance for imports of goods for the private sector. Local currency generations will be used to shore up the financial position of the Central Bank. Policy conditions for the first two tranches relate to achieving macroeconomic targets of the stabilization program announced on 3/3/91, specifically, targets for net foreign and domestic assets of the Central Bank, and net credit to the public sector. For the third and fourth tranches, disbursements will also be conditioned on progress in: (1) establishing private financial institutions offering a full range of financial services; (2) liberalizing international trade, to be demonstrated by non-discriminatory licensing of private sector export firms, and study of non-tariff trade barriers; and (3) privatizing state enterprises, for which CORNAP, the agency responsible for privatization, is currently preparing individual prospectuses. Pro-Ag amendment of 8/13/91 increases funding to $162.5 million (with most of the new funds to be used for partial payment of arrears to multilateral development institutions) and adds conditionality requiring, inter alia, that the GON reduce the number of civil servants by an additional 2,500 (for a program total of 10,000) and make arrangements for clearing its arrears to multilateral development organizations. (PD-ABM-149)