Ortega Signs IMF Loan Agreement

October 9, 2007
Managua, Nicaragua

After concerns that President Daniel Ortega has moved too far to the left, the former revolutionary proved once again that he can never be counted out. Last Friday, Nicaragua signed a three-year, $111 million loan agreement with the International Monetary Fund (IMF), the venerable institution that is often blamed for reducing poverty at the expense of economic growth.

Calling it "mission impossible," Ortega said that the accords will increase social spending and improve investment in energy, water, education and health. "It was not easy because the government is critical of the IMF," said Ortega. "Our position is to use the funds as an instrument for developing countries…instead of the enrichment of the few."

Nicaragua will receive $18.5 million from the IMF this week as part of a broad program to foster economic growth and reduce poverty. During the first year, the program emphasizes improved energy policy to end chronic blackouts. The program's second year will strengthen Nicaragua's financial services, and the final year aims to take on long-term challenges, such as the under-funded social security system.
The IMF said in a statement that the Ortega administration recognizes the importance of implementing the program in the face of "a more difficult external environment.'' The government is "also committed to increasing private investment and intends to continue working on strengthening the business climate.''

This is the fourth accord that Nicaragua has signed with the IMF since emerging from a decade-long war in 1990. IMF officials credit the tighter budget measures and privatization of public utilities with improving economic stability. But tensions have risen as reforms fail to lift the country out of poverty.

President Ortega has said that he wants to rid Nicaragua of the IMF in five years, stopping short of allied leaders in Venezuela and Ecuador, who have vowed to immediately withdraw from association with the IMF.

"Nicaragua has made important strides over the last years," the IMF stated, citing steady economic growth and improved social spending. "The new government's program aims to consolidate these gains, to move forward to reduce poverty in a more decisive way."

Your Latin America Insider,

Suzan Haskins
for International Living