A Mission of the International Monetary Fund (IMF), headed by Mr. Robert Feldman, has completed its two-week stay in Croatia, during which members of the Mission met with representatives of the Croatian National Bank, Ministry of Finance and other government institutions, commercial banks and public enterprises. When reviewing recent economic and financial developments in Croatia and the starting points of Croatian economic and monetary policy for the coming year, the Mission paid special attention to prospects for the further maintenance of macroeconomic stability and a satisfactory balance of budget revenues and expenditures, for reducing the current account deficit to levels conforming to the real possibilities of its financing in changed circumstances on international financial markets, as well as to efforts made to consolidate effectively the Croatian banking system.

The IMF Mission believes that, when formulating economic and fiscal policy for 1999, Croatia has to take into consideration the fact that access to capital on international financial markets has become more difficult and more expensive, while the inflow of foreign exchange based on repatriation of foreign currency savings recorded after the successful implementation of the stabilization program and the end of war in Croatia has inevitably been dissipating. In these circumstances, the expected current account deficit of 7.5 percent of GDP in 1998 - although significantly reduced in comparison to the 1997 deficit - is not sustainable. The IMF Mission believes that Croatia should consider all these factors when formulating its future fiscal and monetary policy, if it wants to preserve a stable macroeconomic framework in 1999. In addition, maintenence of the stability of the exchange rate with fluctuations only within a narrow band remains a very important task for a country where citizens evaluate the credibility and the sustainability of country's economic policy and banking system, as well as their inflationary expectations, largely according to developments in the exchange rate.