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Romania to Get USD 1.17 bn Disbursement from IMF

The International Monetary Fund Friday approved a $1.17 billion disbursement to Romania after reviewing the country's progress in meeting terms of a $17.45 billion loan.

'Policy implementation under the fund-supported arrangement has remained strong,' John Lipsky, the IMF's first deputy managing director, said in an e-mailed statement after an IMF board meeting. 'Romania is now on a clear path to meeting its short and medium-term fiscal goals.'

Romania, which has been relying on a 20 billion-euro ($25.9 billion) bailout led by the IMF to stay afloat, passed a 2011 budget with a deficit of 4.4 percent of economic output as agreed with the Washington-based lender, as well as key wage laws in December to qualify for the payment.

'The current challenge is to fully implement the approved reforms and maintain tight control over expenditures to assure that the budget parameters are observed.' Lipsky said.

Romania's economy is mired in the worst recession in 20 years. The government has raised the value-added tax rate by 5 percentage points and cut public wages by 25 percent to squeeze the budget gap to 6.8 percent of gross domestic product in 2010. The retirement age was also raised to 63 for women and 65 for men.

The IMF's approval paves the way for Romania to receive another 1.5 billion euros from the World Bank and the European Union by the end of March as part of the bailout loan. The Romanian government is considering taking a new precautionary loan from the IMF in April to strengthen its credibility and streamline its fiscal system. The current loan ends in May and the central bank said Thursday that parameters for a new credit were set at a meeting with Cabinet officials.

IMF Statement:

IMF Completes Sixth Review Under Stand-By Arrangement with Romania and Approves €904.8 Million Disbursement

The Executive Board of the International Monetary Fund (IMF) today completed the sixth review of Romania's economic performance under a program supported by a 24-month Stand-By Arrangement (SBA). The completion of the review enables the immediate disbursement of SDR 769 million (about €904.8 million or US$1.17 billion), bringing total disbursements under the program to SDR 10.569 billion (about €12.44 billion or US$16.12 billion).

In completing the review, the Executive Board also approved Romania's requests for a waiver of nonobservance of the end-December 2010 performance criterion on general government domestic arrears and for a waiver of applicability of the end-December 2010 performance criteria on the general government overall balance, the general government guarantees and for the target on inflation at end-December 2010.

The SBA was approved on May 4, 2009 (Press Release No 09/148) in the amount of SDR 11.443 billion (about €13.46 billion or US$17.45 billion). The arrangement entails exceptional access to IMF resources, amounting to 1,111 percent of Romania's quota.Following the Executive Board's discussion on Romania, Mr. John Lipsky, First Deputy Managing Director and Acting Chair, stated:

'Policy implementation under the Fund-supported arrangement has remained strong. However, progress on the elimination of domestic arrears has been slower than envisaged. The authorities have taken important structural measures, including pension and public wage reforms and the passage of a prudent 2011 budget.

'Romania is now on a clear path to meeting its short and medium-term fiscal goals. The current challenge is to fully implement the approved reforms and maintain tight control over expenditures to assure that the budget parameters are observed. In this respect, further efforts are crucial in the health care sector and in public enterprises to control spending pressures. Improving absorption of European Union structural funds should become a top government priority. Efforts to improve tax administration should continue. The initiation of labor and social safety net reforms will also help boost productivity and target limited budgetary resources to the most vulnerable. Priority should be given to permanently resolving the issue of domestic arrears by way of improving payment discipline in the economy and increasing the credibility of the authorities' adjustment efforts.

'The authorities' monetary and financial sector policies have been appropriately prudent and proactive, helping preserve financial stability in the face of the global financial crisis. The jump in inflation due to the recent value added tax increase is temporary, but continued caution is nevertheless needed in gauging the timing and remaining room for further monetary easing. The banking system remains liquid and well-capitalized, but continued vigilance in financial sector supervision is crucial to assure financial sector resilience against increasing non-performing loans and the unsettled regional situation.'

Sursa: http://www.actmedia.eu

Tags: euro budget government financial arrangement under disbursement approved billion meeting romania

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