Authorities say 'NO' to the seventh tranche of the IMF-EC-WB loan

“The mission has reached agreement at staff level on the seventh and final review of the current Stand-By Arrangement (SBA). Subject to approval by the executive board, tentatively scheduled for late March, the eighth disbursement of about EUR 1 billion will become available for the Romanian authorities shortly after the board meeting in March. The authorities, however, have decided not to draw the funds under the seventh review,” Jeffrey Franks, IMF mission chief for Romania stated today during the IMF visit in Bucharest.

According to the IMF officials, the total disbursements under the current SBA amount to about EUR 12.4 billion. They added that the mission has also reached agreement at staff level on a new 24-month precautionary SBA in the amount of EUR 3.6 billion, 300 percent of quota. The SBA will be in conjunction with precautionary support from the European Union of EUR 1.4 billion and a loan from the World Bank of EUR 0.4 billion.

The IMF officials have state that it is expected growth of 1.5 percent in 2011 rising to 4-4.4 percent in 2012, based on continued strong exports complemented by gradually improving domestic demand. Current policies put these deficit objectives well within reach. However, reforms must be continued, particularly in improving collection of existing taxes and in health sector and capital spending.

“To generate higher sustainable growth, we need to improve the operations of the public sector, particularly in state owned enterprises (SOEs), while creating conditions for great private sector investment. In the public sector, the focus will be on boosting absorption of EU funds and on restructuring (as well as bringing private investment into) the transport and energy SOEs to turn them from being a drag on the economy to become an engine of growth. Efforts to cut bureaucracy, improve regulators’ effectiveness, and open markets will help improve the business climate for foreign and domestic investors,” said Franks.