IMF Approves EUR 900 mn Disbursement For Romania

The funds will be transferred to Romania by July 6 at the latest, said Mihai Tanasescu, Romania's representative to the IMF. The money will go into the central bank's reserve to cover the balance of payments deficit, he added.The IMF's board unanimously voted the review report on Romania and accepted a third waiver of non-observance of the performance criterion pertaining to general government domestic arrears.'It is a strong signal of support for Romania's planned reforms and of trust for the way things are developing,' Tanasescu said.An IMF mission visited Romania between April 27 and May 10 for the fourth review under the standby arrangement.

Following the mission, the Romanian government announced harsh austerity measures aimed at slashing public spending and reducing the budget gap to 6.8% of the gross domestic product this year, from a deficit of 7.4% of GDP in 2009.However, the country's highest court rejected a planned 15% cut in pensions, leading the government to increase the sales tax by five percentage points to 24% instead.

Romania and the IMF agreed last spring on a EUR 13 bn loan, as part of a larger EUR 20 bn aid package that includes funds from the European Commission, the World Bank and other international lenders.So far, Romania has received around EUR 9.2 bn in IMF money and another EUR 2.5 bn from the Commission.The Commission is expected to disburse a third tranche worth EUR 1.15 bn to Romania in September. Joint teams from the IMF and EU are scheduled to visit the country for a new review mission on July 20th.