Openness of the economy and international integration are the most important guarantees for economic development in Estonia. Proceeding from those principles, Eesti Pank upholds cooperation with such international financial organisations as the International Monetary Fund (IMF), the Bank for International Settlements (BIS), the International Bank for Reconstruction and Development (IBRD) and the European Bank for Reconstruction and Development (EBRD). Preparations for Estonia's joining the European Union are gaining ever more importance. Therefore, Eesti Pank has intensified cooperation with various institutions of the European Union in 1996 and has taken more active part in the domestic inter-ministerial working groups that draft the pre-accession strategy. Eesti Pank also cooperated with the Organisation of Economic Cooperation and Development (OECD).

INTERNATIONAL MONETARY FUND

In the spring of 1996, the Republic of Estonia and the IMF signed a new memorandum of economic policies. The memorandum reflects the main economic policy goals for Estonia for the next 15 months. Estonia pledged to continue liberal and persistent economic policy that facilitates stable economic development. In the framework of the cooperation programme, the IMF granted Estonia 13,950,000 SDR in the form of a Precautionary Standby Agreement the amount of which Estonia has no intention to purchase.

In 1996 the IMF discussed several issues relevant to the development of world economy - increasing the reliability of statistical information, supporting economic reforms in poor countries, increasing the loan resources and liquidity of the IMF and making the Fund activities more open. Eesti Pank participated in those discussions in the framework of the Nordic-Baltic joint constituency set up in 1992. The views of the Nordic and Baltic countries have since 1996 been represented by Eva Srejber from Sweden. The common standpoints of the eight countries in the IMF Board were coordinated by the central bank of Sweden.

The IMF also continued to publish its regular economic studies. For Eesti Pank, the most interesting were the studies on restructuring and strengthening of banking systems, and on the application of the currency board system in the world. These studies are of great support in developing and implementing the policy of the central bank.

The IMF also worked out standards for statistical information which help the countries to offer the general public extensive, timely and reliable economic and financial information in the conditions of greater economic and financial integration. An inter-ministerial working group, set up by the government and including representatives of Eesti Pank, began preparations for the introduction of the respective standards in Estonia. The Special Data Dissemination Standard covers statistical data on the real, fiscal, financial and external sectors of the economy.

In December 1996, the term of office of the local IMF representative in Estonia, Basil B. Zavoico, came to an end. In the past two and a half years he played an important role in supporting Estonia's economic reforms and strengthening ties between Estonia and the IMF. With the departure of Mr. Zavoico from Estonia, the permanent presence of the IMF representative came to an end as well, the fact can be treated as a recognition of Estonia's success in carrying out economic reforms. From 1997 the activities of the IMF in Estonia are coordinated by the Latvian representative office.

OTHER INTERNATIONAL ORGANISATIONS

In 1996 Eesti Pank took part in the work of the monetary policy, banking supervision, financial markets and international cooperation working groups of the Bank for International Settlements. The BIS continued to publish studies on the activities of central banks. In October, representatives of Eesti Pank attended the regular round-table meeting of the OECD, Centre for Cooperation with the Economies in Transition (CCET) and several Estonian ministries which was held in Estonia and tried to determine the areas of future cooperation. Eesti Pank also took part in the activities of academic economic research, such as the Société Universitaire Européenne de Recherches Financiéres (SUERF) and the Wiener Institut für Internationale Wirtschaftsvergleiche (WIIW). These institutes carry out studies and organize joint forums for the exchange of information on economic, financial and monetary policy.

In the framework of technical assistance, Eesti Pank was visited by experts from the Finnish and Danish central banks who shared with their experience on banking supervision and the functioning of payment systems in the Nordic countries. A Core Advisors Group, set up in the framework of the European Union's PHARE programme in 1994, also continued its work in Estonia, with the aim of increasing the analytical skills of Estonian credit institutions in evaluating loan projects and granting loans.

EUROPEAN UNION

The Estonian government has submitted an application for the membership of the European Union. Now the first priority is to carry out pre-accession strategy, based on the European Agreement[1] , the White Paper[2], the structural dialogue meetings and technical assistance. This requires the cooperation of different government institutions.

Eesti Pank also participated in the work of the government's Council of Senior Civil Servants which deals with coordinating the pre-accession strategy. The Council has worked out and submitted to the government the programme of Estonia's integration with the European Union.

In the near future, the most important aspect of preparing for the EU membership is the harmonization of Estonian legislation with that of the EU. In addition to the harmonization of directives listed in the White Paper this also means bringing legislation that falls into the competence of Eesti Pank into line with the respective articles of the European Agreement. Eesti Pank has already began the examination of the legislation: in the framework of the PHARE programme independent experts have been asked to study the Law on Credit Institutions and the draft of the Law on Guaranteeing Deposits. Negotiations have been held with the same experts on reviewing the Law of the Central Bank of the Republic of Estonia and drafting the Law on Money Laundering. The approach of the potential joining date also requires us to take into account the impact of the European Economic and Monetary Union on drafting Estonian laws and on local decision-making. In cooperation with the PHARE experts, Eesti Pank has began preparations for the introduction of the on-line RTGS system.

In spring the European Commission sent Estonia a questionnaire which is part of the Commission's preparations for the future expansion of the EU. The questionnaire is an important part of the report drawn up for the evaluation of the political and economic situation of each associated country, aimed at determining whether the country is ready to begin talks on full EU membership. In accordance with the inter-ministerial division of labour, Eesti Pank provided the European Commission with a survey of the Estonian monetary and exchange rate policy, movement of capital, financial markets and the development of the banking sector.

In the framework of the Council of Senior Civil Servants, representatives of Eesti Pank took part in the meetings of the legislation harmonization working group. Eesti Pank also attended the meeting of the economic dialogue working group held in the framework of the Free Trade Agreement[3] , aimed at formulating Estonia's medium-term macroeconomic policy as well as economic policy for each sector, and the efficient implementation of this policy.

Eesti Pank has prepared the main guidelines for Estonia's integration with the European Union. Full membership in the EU and the ensuing obligations and changes will to some extent affect all the departments of Eesti Pank. In order to improve the knowledge of the Bank's staff on the European Union respective surveys have been made available in the Intranet.

In 1996 Eesti Pank's cooperation with Eurostat became even more closer. Representatives of the bank attended the regular meetings meant for the EU candidate countries. At the meeting in Luxembourg in June it was agreed to bring Estonia's balance of payments into line with the respective EU standards. A comparative balance of payments[4] for the year 1995 was submitted to Eurostat.

COOPERATION WITH CENTRAL BANKS OF OTHER COUNTRIES

Eesti Pank has paid constant attention to developing relations with the central banks of other countries. In 1996 Lithuania hosted a traditional joint seminar of the Baltic countries' central banks which has become an important venue of exchanging information and experience. This time, attention was focussed on the monetary policy, banking supervision, banking statistics and the accounting of the central banks.

At the fourth seminar of Eesti Pank and the central bank of Finland the problems of Estonian and Finnish economic policy were discussed, as well as the organizational development of a central bank, development of financial intermediation in Estonia and preparations for the European Monetary Union.

Relations with the central banks of Central and East European countries were maintained by mutual visits. One of the aims of such visits was the exchange of information and experience on preparations for the possible joining of the European Union and the European Monetary Union.

[1] The Association Agreement between the European Union and its Member States and the Republic of Estonia.
[2] The White Paper is part of the pre-accession strategy of Central and East European countries who have signed association agreements with the European Union, a book of instructions that helps them to conform with the requirements of the European Union single market.
[3] The Free Trade Agreement between the European Union, the European Atomic Energy Community and the European Coal and Steel Community, on the one hand, and the Republic of Estonia on the other.
[4] Estonia's 1995 balance of payments was drawn up in comparison with the European Union, the USA, Japan and the rest of the world countries, the overall balance of payments was also submitted.