Romania fails to reach agreement with the IMF over latest assessment

Newsroom 10/02/2015 | 16:19

The International Monetary Fund (IMF) and the authorities in Bucharest did not reach a new agreement, it was announced on Monday. Following the talks, the IMF mission has issued a final declaration addressing major topics of the Romanian economy, reports Agerpres.

The Romanian economy has largely corrected the internal and external imbalances through a mix of solid macroeconomic policies, yet Romania remains vulnerable to external shocks, and fixing balance sheets has not been finalized yet, IMF experts say in their declaration.

In this context, the IMF recommends combining sustainable macroeconomic policies with measures to streamline public spending — especially accelerating the uptake of EU funds for upgrading public infrastructure — stepping up reforms dragging in the public enterprise sector and solving the outcome of the downturn in the financial sector.

The IMF says that the discussions with the Romanian authorities have been constructive, but a number of points have remained in suspension, this being the reason for which the mission will not end with an analysis on the international financial institution’s Board.

Prime Minister Victor Ponta announced on Monday that the Government had not agreed with the international financial partners upon the increase in natural gas prices and restructuring of the Hunedoara and Oltenia energy complexes, a reason why another letter of intent would not be signed, adding however that the rest of the objectives are met.

According to the prime minister, the agreement is in effect and the two issues will be re-discussed in April, and one of them refers to the continuation of the agenda on natural gas price deregulation.

According to the document, the IMF has also recommended the National Bank of Romania (BNR, the central bank) to limit its interventions on the foreign currencies market and to keep a prudent stance with moderate accumulation of reserves.

Deregulation of gas prices for the domestic consumers should be started again, as an additional support is ensured to the most vulnerable, also reads the document. The fund expects for Romania GDP to grow by 2.7 pct this year and by 2.9 pct in 2016. IMF also recommends reducing taxing low-income employees through targeted measures.

A team of the IMF and the European Commission was in Bucharest, from January 27 to February 9, to continue the discussions for the third revision of the stand-by preventive arrangement and for the first evaluation of the preventive programme on the balance of payments with the EU.

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