Announcement of Consultative Group Meeting for Nicaragua on March 26, 1992

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 92/LAC 5 Contact: iro Gamarra (202) 473-8721 CONSULTATIVE GROUP MEETING-FOR NICARAGUA Washington, D.C. March 26, 1992 -- Representatives of 16 countries and 10 international organizations concluded today in Washington, D.C. the third Consultative Group meeting for Nicaragua. The donors applauded the very significant achievements of the first year of the Government's economic stabilization and adjustment program and supported its efforts to address the very critical period of transition to sustained economic growth. The meeting was chaired by Mr. Rainer.B. Stoeckhan, World Bank's Director for Mexico, Central America and Panama. The Nicaragua delegation was presided by the Minister of the Presidency, Mr. Antonio Lacayo, accompanied by Mr. Emilio Pereira, Minister of Finance, Mr. Silvio de Franco, President of the Central Bank, Mr. Zacarias Hernandez, Delegate of the UNO coalition, Mr. Daniel Ortega, secretary-General of the Frente,Sandinista de Liberacion Nacional (FSLN), Mr. Daniel Nuns, President of the National Union of Farmers and Livestock Ranchers, Mr. Alberto Chamorro, President of the Chamber of Industry, and Mr. Juan Sacasa of the Chamber of Commerce. In their report to the Consultative Group, the Nicaragua delegation described the successes of the year old economic stabilization and adjustment program. Hyper-inflation has been arrested, the exchange rate stabilized, public sector expenditures reduced drastically and the economy opened up to private sector participation. They noted also that one-third of the state- owned enterprises had been sold or returned to their previous owners. The delegation said that efforts at fostering national reconciliation have helped restore a deeply divided society and led to disarmament and demobilization. For the future, the delegation highlighted the actions they are implementing to solidify property rights, to foster competitiveness and productivity in the economy, encourage a strong complementarily between private and public investment, and to shield the most vulnerable groups against the hardships of economic adjustment. The International Monetary Fund (IMF), World Bank and the Inter- American Development Bank (IDB), each of which is providing financial support to Nicaragua's reform program, gave positive reports on the first year of the program. The IMF described the economic performance in 1991 and the macroeconomic program for 1992. It cautioned the donor community about Nicaragua's fragile external position and stressed the need for continued and -2- additional support. The World Bank reported on the achievements in restructuring and reducing public expenditures, opening the financial sector to private sector participation, liberalizing trade and establishing appropriate regulatory frameworks. To successfully manage the transition period and reach sustained economic growth, the World Bank cited the need for greater efficiency and effectiveness in the public sector, and improved social services. It noted that the key to the reactivation of growth was the private sector and continued success of structural adjustment program would require substantial assistance from the international donor community. The ID3 also recognized the considerable progress in the reform program and emphasized the importance of infrastructure rehabilitation as a necessary condition for the resumption of growth. The donors praised the achievements of the Government and acknowledged the very difficult challenges ahead. They also noted the urgent need to the adjustment process, and, over the longer term, to invest in human resource development. They also urged quick and equitable resolution of outstanding property claims as a necessary element in creating an investment climate conducive to attracting needed capital. In recognition of the past, year's advances and the very ambitious agenda ahead, the meeting indicated that international donor support for Nicaragua could exceed 5600 million in 1992. A comparable level of support could be available for 1993, assuming the continued successful implementation of the reform program. In his closing remarks the Chairman acknowledged the constructive dialogue and welcomed the sustained support of the international community. The immediate tasks of strengthening aid coordination and helping to build institutional capacity, he said, were critical to support the Government's efforts. He noted the very significant progress of the last year, and the challenges ahead, specially in alleviating poverty. He also welcomed the presence of the broad representation of the Nicaraguan delegation, noting that the national reconciliation process is critical to the success of stabilization, adjustment and the transition to sustained economic growth and social development. The Consultative Group was attended by representatives of Austria, Canada, Colombia, Denmark, Finland, France, Germany, Japan, Mexico, the Netherlands, Norway, Spain, Sweden, Switzerland, the United States of America and Venezuela. In addition to the world Bank, the Central American Dank for Economic Integration, Commission of the European Communities, Inter-american Development Bank, International Fund for Agricultural Development, International Finance Corporation, International Monetary Fund, Pan-American Health organization, United Nations Development Programme, and the world Food Programme also participated in the meeting.