WB pays out Croatia loan tranche

ZAGREB (Reuters) – The World Bank has disbursed the first tranche, worth 100 million euros, of a delayed loan to Croatia, after Zagreb met a key requirement for a comprehensive tax reform, the Finance Ministry said yesterday. «The government has adopted a draft law on a unique tax number and sent it for parliamentary approval. Thus Croatia fulfilled all requirements for taking the first tranche of the World Bank’s PAL 2 loan (for structural reforms),» the ministry said in a statement. The unique tax number, involving giving each citizen an identification number for tax purposes, is part of a comprehensive tax reform and is seen as a major tool in efforts to uproot corruption. The loan was signed in June last year and was originally to be disbursed last autumn, but was postponed because the pace of agreed reforms slowed considerably as the country focused on a parliamentary election in November. The loan is altogether worth 150 million euros and is aimed at reforms needed to improve efficiency in the public sector and enhance economic growth. Croatia, which hopes to join the European Union in 2010 or 2011, is undertaking painful structural reforms aimed to make its economy ready for competition in the common market. The key tasks include reforms of the oversized public administration and slow judiciary, restructuring of loss-making industries like shipbuilding and railways and a fight against corruption. Croatia’s economy has been growing around 5 percent annually in recent years, driven mostly by state investments, household consumption and tourism. Analysts and the World Bank say Croatia needs to reduce the share of the state in its economy, currently at around 30 percent, to boost growth.