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 Press release - New Financial Support For Poorest Countries (WB)

 Press release date: 10.12.1998

Europe and Central Asia Region
News Release No. 99/2041/ECA Contact: Franz Kaps (202) 473 4726

WASHINGTON, December 11, 1998—The World Bank and the International Monetary Fund (IMF) today hosted a special financing meeting to mobilize additional balance of payments support for the poorest countries neighboring Russia which have been hardest hit by the Russian crisis. The meeting was chaired by John Odling-Smee, Director of the European II Department of the IMF, and Johannes Linn, Vice President of the World Bank’s Europe and Central Asia Region, and included participants from the United States, Japan, Russia, Canada, several European countries, the European Union, and the Asian Development Bank.

With the recovery of economic growth and the reduction of inflation to single digits before the Russian crisis, Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, Moldova, and Tajikistan have been highly successful in macroeconomic stabilization and have made significant strides in structural reforms in recent years. The meeting participants saw the financial crisis in Russia as threatening these stabilization gains and endangering the support for reform policies in the whole region.

In recent months, these countries have committed themselves to tighten financial policies in order to limit the widening of external imbalances originating from weakening market prospects, lower capital inflows, and contagion effects of Russia’s economic crisis. The meeting was called to support these countries’ own efforts by raising funds to cover half of the financing gap caused by the Russian crisis. Participants in the meeting pledged nearly US$200 million to bolster these countries’ foreign reserves. Moreover, some participants indicated that more may be added in coming months.

In their concluding statement, Mr. Odling-Smee and Mr. Linn said, "These pledges by the participants, combined with the governments’ policy adjustments, will address the worsening balance of payments situation resulting from the Russian crisis and will help to promote stability in financial markets."

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