IMF approves the first and second reviews of Romania's aid deal

The International Monetary Fund approved the first and second reviews of Romania’s aid deal on Wednesday, after weeks of bickering over taxes between the government and the president threatened to derail years of deficit-cutting reforms.

The IMF sign-off means Romania is on track with the conditions of its 4-billion-euro (USD 5.5 billion) aid deal from the Fund and European Commission, the country’s third since 2009.

“Romania is making good progress under the precautionary standby agreement,” the IMF said in a statement, adding it will now make 436 million euros available to Romania.

“However, the economy and the financial sector remain vulnerable to shocks. Steadfast program implementation is essential to preserve macroeconomic stability and policy buffers in this election year.”

The Romanian Government saluted IMF’s decision and it claims the advancement reflects Romania’s improving macroeconomic situation and the progress made in structural reforms.

“The budgetary adjustment continued in 2013, given the Government’s considerable efforts to pay arrears for local authorities, to reduce state company debts, to eliminate arrears in health and to grow national cofinancing for a better EU fund absorption rate. IMF approving the two reviews confirms the sustainability of the budgetary estimates for 2014 as well as the positive direction reforms are heading in”, the Government stated in its press release.

Romania, the EU’s second-poorest state, does not plan to draw on the funds from its latest IMF deal. But their availability provides reassurance for foreign investors concerned about fiscal slippage before a presidential election and a European Parliament election later this year.