IMF to release new money for Romania, next review in April

The International Monetary Fund (IMF), which has been reviewing its stand-by agreement with Romania in the last two weeks, will recommend its board in Washington release the next two installments of the bailout loan. “We are optimistic that in February the IMF board will acknowledge the efforts made by Romania,” said Jeffrey Franks, the head of the stand-by evaluation mission. The two installments have a cumulated value of EUR 2.3 billion.

A new IMF mission will return in Romania at the end of April and Franks does not expect the fund will need to direct future loan installments to the state budget. The next review mission will check whether the fiscal responsibility law has been enforced, fiscal reform and the quarterly budget deficit targets. By then, the general director of the IMF, Dominique Strauss-Khan, will have visited Romania as part of a European tour. His visit is scheduled for March.

The IMF expects Romania to be able to repay its loan. “Romania has always paid. We haven’t had any problems so far and I don’t think we will have in the future,” said Franks.

So far, the Romanian authorities have agreed to adopt the unitary pension law in June this year, while the fiscal responsibility law will be enforced in March.

“The pension law needs to adopted in the first half of this year. The pension system is unbalanced at this moment, which could endanger the receipt of money for pensioners in the future. In the coming months, the pension law will be sent to Parliament,” said Franks.

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The unemployment rate in Romania could reach 1 million by mid-year, Franks also said. The state should reduce its wage bill, which could be done by axing 10 percent of state employees or by reducing their salaries, he added. Romania currently has 700,000 unemployed.

The country signed a EUR 12.95 billion loan agreement with the IMF. It has already received the first two loan installments, totaling some EUR 6.6 billion. The first installment, EUR 4.8 billion, was used to boost Central Bank (BNR) reserves. From the second payment, half went to the BNR’s reserves and the other half to the state’s treasury account at the bank.

Corina Saceanu