World Bank says Romania made significant progress on reforms, but further fiscal consolidation is needed

The World Bank noted the progress that Romania made in the implementation of the reforms towards macroeconomic stabilization. However, the Bank stressed that further challenges remain in order to secure full recovery and growth in the short term, due to both global and domestic factors. The remarks were made at the conclusion of the joint mission to Romania held during July 21 – August 2 with the International Monetary Fund (IMF) and the European Commission. The bold macroeconomic stabilization program that was put in place by the Romanian government, with supervision from the joint mission of the IMF, EC and World Bank, back in 2009 will be followed by a new program. The Romanian government will be pursuing further fiscal consolidation and efficiency over the coming two years.

World Bank recommendations for Romania’s ailing sectors

Public health-care system

A new reform package will be implemented to ensure that financial resources are used efficiently and that equity access to quality health-care is improved. The reform measures include restructuring the hospital network, definition of the basic package of health-care services, introduction of the supplementary private health insurance system and cost containment measures for the consumption of pharmaceuticals.

Energy sector

Romania should develop viable public sector energy companies to attract private sector investment. Hence, the Romanian government has to restore the credibility of Romania’s sound commercial practices, competitive energy markets and implementation of EU-compatible energy laws and regulations. The World Bank mentions that Romania’s energy regulator, the National Authority for Regulating Energy (ANRE) has almost become non-functional. The bank also stressed the need to merge coal-lignite mining and power companies into Hidroenergetica and Electra, a plan that was not approved by the Bucharest Court of Appeal.

ANRE will be retooled by the Romanian Government through a reform package; management positions will be granted for private managers, shares of key energy companies will be listed on the Bucharest Stock Exchange and energy reforms will be resumed in accordance with EU legislation.

Transportation and Infrastructure

The challenges facing the transportation sector remain difficult, with the need to comply with European regulations, and to ensure financial stability in railway and deliver on infrastructure investment. However, the Government has started to tackle the issue of arrears and is reviewing contracting conditions to improve EU funds absorption.

The World Bank is to disburse EUR 400 million this fall, part of the DPL (Development Policy Loans) with Romania. The DPL reform agenda supports Romania’s path towards fiscal stability. The bank has approved loans totaling EUR 600 million since the fall of 2009.