The International Monetary Fund (IMF) has approved the second and third loan installments for Romania, which will result in a EUR 2.45 billion disbursement for the country. This will bring the total sum received by Romania from the fund under the stand-by agreement to a total of EUR 9.32 billion, the IMF has announced. “Policy implementation has been strong despite a difficult political and economic environment. Nonetheless, continued efforts to fully implement the economic program remain essential to strengthen macroeconomic stability and provide the basis for strong, sustainable growth,” said John Lipsky, first deputy managing director and acting chair of the IMF. Despite recent consolidation efforts, Romania faces major fiscal challenges, according to the IMF. The deficit needs to be reduced to stabilize the public debt-to-GDP ratio and to comply with the criteria for accession to the euro zone. The 2010 deficit target strikes an appropriate balance between accommodating the still weak economic situation and medium-term consolidation objectives.
Additional reforms to strengthen fiscal controls are crucial, including in expenditure commitments, contingent liabilities and public entities outside the central government.
Pension reform, public employment and wage reforms, and improvements in public sector efficiency will be key, according to the IMF.