World Bank to suspend loan

VILNIUS - The World Bank announced this week that it intends to temporarily suspend the payment of the second part of a structural adjustment loan to Lithuania. The bank's announcement follows a similar decision in Latvia last month.

The $50 million was due to be granted in July 2001, Mantas Nocius, head of the representative office of the World Bank, told BNS.

Nocius attributed the suspension of the loan installment to Lithuania's failure to carry out its obligations in restructuring of the power utility Lietuvos Energija, to foot-dragging in the privatization process of the state-owned gas company Lietuvos Dujos and to problems in the agricultural sector.

"One of the major conditions for receiving the second part of the loan is the restructuring of Lietuvos Energija, which has not begun yet as the Seimas (Lithuania's parliament) has not adopted a decision on the issue," Nocius said.

"It is should not be considered a tragedy (that the loan repayment has been suspended). Lithuanian has to carry out complicated reforms and it is only natural that they have taken more time than planned."

Nocius said that the World Bank generally approves of the Lithuanian government's reform efforts.

Lithuania and the World Bank signed the agreement on an 11-year, $100 million loan in July 2000. In the same month, Lithuania was granted the first part of the loan.

Deputy Finance Minister Mindaugas Jonikas told BNS the suspension of the loan payment will not affect Lithuania financially.

"The financing of the budget is guaranteed and interest on loans in both domestic and foreign markets is low and decreasing even further. Therefore, I would not dramatize the situation," Jonikas said.

The government, he added, will continue with reforms to meet its obligations.

"I believe that the partners of the ruling coalition will agree on the privatization of Lietuvos Energija. We called on the Ministry of Agriculture to take decisions that would pave the way for the fulfillment of obligations. If they succeed, we could receive the loan in autumn," Jonikas said.