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Jeffrey Franks reaffirms IMF’s flexibility towards Romania

The National Bank of Romania (BNR) cannot directly finance Romania's budget deficit by purchasing state bonds directly from the Ministry of Public Finance (MFP), IMF mission chief Jeffrey Franks declared during the talks held yesterday by the IMF delegation at the MFP head offices, Agerpres reports. According to Franks, no central bank in Europe may get involved in financing the budget deficit of a country.

The chief of the IMF mission once again emphasized that the international institution will have a flexible attitude towards Romania, as well as towards other states in the region that resorted to IMF credits, given the economic situation across the region. Tonny Lybek, the head of the IMF bureau for Romania and Bulgaria, explained the reason why the Fund took this more flexible stance: "Based on the information which we had in March we committed to endorse Romania's economic programme with a real reduction of the GDP of 4.1 percent in 2009 and stagnation (average of 0 percent) in 2010, however we anticipated a relaunch in activity in the second half of 2010. Now we are closely monitoring the situation and it is necessary we adjust the economic framework during the ordinary fact-finding mission of early in August."

The new scenario taken into consideration in establishing the new macroeconomic framework, in the context of the first evaluation of the stand-by agreement, shows an economic decline of 8-8.5 pc this year - a forecast that is taken into consideration by IMF experts, as well as by the Government, sources participating in the negotiations declared, quoted by Mediafax. Romanian PM Emil Boc and members of the Cabinet yesterday met the IMF mission's officials, but no details of these talks surfaced until the closing of this newspaper's issue. They were supposed to debate upon the blanket salary law, Franks declared.

The IMF asked the Government to make sure that the special pensions will be calculated in relation to the level of the paid social contributions and to regulate more tightly the procedure of disability retirement, warning that a quarter of retirement decisions are on medical grounds. The demands were formulated by the members of the International Monetary Fund (IMF) delegation in Tuesday's discussion with Government representatives, official sources said.

"The Monetary Fund urged that special pensions get integrated in the public system, through the future pertinent law, and get calculated based on the contribution principle. Discussions also targeted the sustainability of the pensions system, where it was demanded a more rigorous regulation of disability retirement benefits and of early retirement, with the warning that 25 pc of retirement decisions are based on medical reasons," the sources explained.

IMF reminded the Government that it pledged, through the stand-by accord, to gradually raise the retirement age and to index pensions with the annual inflation rate, rather than based on the evolution of the average salary in the economy, as it is the case now.

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Tags: retirement franks romania towards mfp bnr

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