IMF makes EUR 500 mln available for Romania after 4th review mission

Newsroom 22/03/2012 | 10:24

The Executive Board of the International Monetary Fund (IMF) completed yesterday the 4th review mission under the Stand – By Arrangement with Romania, making around EUR 500 million available for the country.

Romania has drawing rights for approximately EUR 2 billion from the IMF but authorities will treat this arrangement as precautionary and not use the funds.

“Romania continues to make good progress under the precautionary Fund-supported program. Policy implementation has remained strong and all program targets were met. After two years of decline, economic growth has resumed and inflation has fallen to historical lows. However, the economic outlook for this year is being weighed down by the declining growth prospects in the euro area,” said Nemat Shafik, deputy managing director and acting chair at IMF.

Shafik said Romania remains committed to reaching a deficit below 3 percent of GDP this year, but spending discipline will be needed to achieve this goal. He added that reforms are needed in the health care sector and in tax administration and that deregulated prices in energy and transport need to be implemented to reduce arrears of state-owned enterprises.

The IMF director said risks in the Romanian banking system remain significant due high non performing loans, but external conditions have eased. He added that inflation continues to decline, but further monetary easing could weaken the Romanian LEU and increase capital outflows.

Romania signed last March a 24-month precautionary stand-by arrangement with the IMF worth EUR 3.5 billion, in conjunction with a EUR 1.4 billion credit line from the EU and EUR 400 million from the World Bank.

The next review mission of the troika (IMF, EU, and WB) will start this April.