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Balance-of-payments assistance to Romania

After the third addendum to the MoU has entered into force, the fourth instalment under the Balance-of-Payments loan is ready to be disbursed.

Basic facts about the programme

The sudden increase in risk aversion during the financial crisis caused market participants to become increasingly concerned by Romania's large internal and external imbalances in the form of a 5.7% of GDP budget deficit and a 11.4% of GDP current account deficit. As a result, capital inflows fell markedly and the exchange rate of the RON against the euro depreciated by more than 30% between August 2007 and January 2009. Consequently, the Romanian authorities applied in Spring 2009 to the EU, the IMF and other international financial institutions for financial assistance.

In May 2009 an agreement was reached to provide multilateral financial assistance to Romania with an overall amount of € 20 billion, consisting of the following contributors:

• European Community, € 5 billion under the balance-of-payments assistance programme
• International Monetary Fund, SDR 11.44 billion (around € 12.95 billion) under an IMF Stand-by arrangement approved on May 4 2009, amounting to 1,110.77 percent of Romania's quota
• The World Bank, € 1 billion under a Development Policy Loan
• The EIB and the EBRD, € 1 billiion combined.

The EU financial assistance is scheduled to be disbursed in 5 instalments:

•  € 1.5 billion released 27 July 2009
•  € 1 billion released 11 March 2010
•  € 1.15 billion released 22 September 2010
•  € 1.2 billion expected to take place in the first quarter of 2011
•  € 150 million expected to take place in the second quarter of 2011

The average interest rate on the amounts so far disbursed by the European Commission is around 3.3%, with repayments starting in 2015.

Chronology of the balance-of-payments assistance programme for Romania

2011

• 18 March European Commission and IMF welcome the continued support by the parent banks of the largest foreign-owned banks for Romania
• 17 March. €4.6 billion bond issued to assist Ireland and Romania
• 8 February. European Commission Staff Statement after a joint mission with the IMF and the World Bank to Romania.

2010

• 3 November. European Commission Staff Statement after a joint mission with the IMF and the World Bank to Romania
• 22 September. Commission pays € 1.15 billion in Balance of Payments support to Romania
• 4 August. Commission concludes that conditions for third disbursement of the EU BoP assistance of €1.2 bn have been met
• 22 July. Press statement. Commission and IMF welcome the reaffirmed support of parent banks to their Romanian affiliates
• 10 May. Statement after joint mission to Romania
• 11 March.EU disburses second instalment of €1 billion Community financial assistance to Romania
• 25 February. Signature of Supplemental Memorandum of Understanding
• 28 January. EU Balance of payments programme for Romania

2009

• 18 November.European Banking Coordination Initiative Meeting for Romania
• 28 July. Commission pays first instalment of € 1.5 billion in balance-of-payments support to Romania
• 23 June. Commission and Romania sign Memorandum of Understanding (MoU) on €5 billion balance-of-payments loan
• 21 April. Commission asks Council to provide a medium-term loan to Romania as part of coordinated multilateral financial assistance
• 25 March. EU intends to provide medium-term financial assistance to Romania of up to € 5 billion

Basic facts about the programme

The sudden increase in risk aversion during the financial crisis caused market participants to become increasingly concerned by Romania's large internal and external imbalances in the form of a 5.7% of GDP budget deficit and a 11.4% of GDP current account deficit. As a result, capital inflows fell markedly and the exchange rate of the RON against the euro depreciated by more than 30% between August 2007 and January 2009. Consequently, the Romanian authorities applied in Spring 2009 to the EU, the IMF and other international financial institutions for financial assistance.

In May 2009 an agreement was reached to provide multilateral financial assistance to Romania with an overall amount of € 20 billion, consisting of the following contributors:

·      European Community, € 5 billion under the balance-of-payments assistance programme

·      International Monetary Fund, SDR 11.44 billion (around € 12.95 billion) under an IMF Stand-by arrangement approved on May 4 2009, amounting to 1,110.77 percent of Romania's quota

·      The World Bank, € 1 billion under a Development Policy Loan

·      The EIB and the EBRD, € 1 billiion combined.

The EU financial assistance is scheduled to be disbursed in 5 instalments:

·      € 1.5 billion released 27 July 2009

·      € 1 billion released 11 March 2010

·      € 1.15 billion released 22 September 2010

·      € 1.2 billion expected to take place in the first quarter of 2011

·      € 150 million expected to take place in the second quarter of 2011

The average interest rate on the amounts so far disbursed by the European Commission is around 3.3%, with repayments starting in 2015.

 

Chronology of the balance-of-payments assistance programme for Romania

2011

·      18 March European Commission and IMF welcome the continued support by the parent banks of the largest foreign-owned banks for Romania

·      17 March. €4.6 billion bond issued to assist Ireland and Romania

·      8 February. European Commission Staff Statement after a joint mission with the IMF and the World Bank to Romania.

2010

·      3 November. European Commission Staff Statement after a joint mission with the IMF and the World Bank to Romania

·      22 September. Commission pays € 1.15 billion in Balance of Payments support to Romania

·      4 August. Commission concludes that conditions for third disbursement of the EU BoP assistance of €1.2 bn have been met

·      22 July. Press statement. Commission and IMF welcome the reaffirmed support of parent banks to their Romanian affiliates

·      10 May. Statement after joint mission to Romania

·      11 March.EU disburses second instalment of €1 billion Community financial assistance to Romania

·      25 February. Signature of Supplemental Memorandum of Understanding

·      28 January. EU Balance of payments programme for Romania

2009

·      18 November.European Banking Coordination Initiative Meeting for Romania

·      28 July. Commission pays first instalment of € 1.5 billion in balance-of-payments support to Romania

·      23 June. Commission and Romania sign Memorandum of Understanding (MoU) on €5 billion balance-of-payments loan

·      21 April. Commission asks Council to provide a medium-term loan to Romania as part of coordinated multilateral financial assistance

·      25 March. EU intends to provide medium-term financial assistance to Romania of up to € 5 billion

Sursa: http://www.actmedia.eu

Tags: euro billion romania middot march released commission banks mission joint statement world support provide instalment after assistance payments under disbursed balance financial programme european

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