Announcement of Nicaragua's Main Challenge is to Deepen Reforms World Bank Says on March 29, 1993

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. 93/S48 Contact: Ciro Gamarra (202) 473-8721 NICARAGUA'S MAIN CHALLENGE IS TO DEEPEN REFORMS, WORLD BANK SAYS Washington, D.C., March 29 , 1993 -- In a report to be presented to a Consultative Group meeting for Nicaragua it has convened for April 2, 1993 in Paris, the World Bank expressed that the main challenge for policy makers in Nicaragua is to deepen the reforms and achieve sustained growth while maintaining macroeconomic stability. In its report on "Stabilization and Adjustment: Enabling Private Sector-Led Growth", the World Bank examines the recent economic performance in Nicaragua and says that "significant progress has been made in implementing the reform program." But, the World Bank recognizes that initial efforts to restructure Nicaragua into an export-oriented, private sector led economy "have yet to produce the desired results". The Bank expresses two main concerns in this respect: the still dominant presence of the state in the economy, combined with stagnant private investment, and the poor performance of exports, together with an undiminished dependence on foreign aid. The report indicates that Nicaragua has the third lowest per capita income level in the Western Hemisphere in 1991, with $340, and the highest population growth rate, 3.3 percent. Unless economic growth resumes, the country's already dismal poverty indicators will worsen rapidly the report stresses. The World Bank indicates that Nicaragua has to rely on expansion of private sector activity and productivity improvements as its main sources of growth in the short and medium term. Existing resources need to be put to a more effective use. In the public sector, the World Bank states, attention needs to focus on reallocating declining resources toward priority areas, away from administrative and unproductive expenditures toward the delivery of more and better public services and improved infrastructural support for private economic activities. The World Bank considers also that grater efforts needs to be made in improving the coordination of foreign aid to ensure that aid allocations conform with development priorities. Finally, the World Bank says, exiting distortions and rigidities that inhibit private activity and impede flexible supply responses need to be removed, both to encourage a more efficient use of existing private resources and, eventually, attract new ones. -2- About 22 donor countries an 15 international and regional organizations have been invited to the Consultative Group meeting, the fourth for Nicaragua, that will take place in the World Bank's European office in Paris, France. The Government of Nicaragua will present a report on "Medium-Term Development Policy for 1993-1995" at the meeting in which priority programs and financial and technical assistance needs for the country will be discussed. A consultative Group for Nicaragua in March 1992, in Washington recognized the significant achievements of the first year of the Government's economic stabilization and adjustment program and indicated its support could exceed $600 million in 1992. *