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IMF approves new precautionary stand-by arrangement with Romania

On Friday, the Executive Board of the IMF approved a new 24-month precautionary stand-by arrangement withRomania worth EUR 3.5bn which will come into effect on March 31, 2011.

European Union will provide precautionary support of EUR 1.4bn, while the World Bank will offer a loan worth EUR 0.4bn.

The IMF considers that the economic prospects are looking much better now and Romania will achieve an economic growth of 1.5% in 2011 and 4% in 2012. Supported by the continued fiscal consolidation efforts and also by the economic growth, the budget deficit will decline to 3% of GDP in 2012. The new stand-by arrangement will focus on reducing domestic arrears, reforming the public health system, improving regulation, governance and pricing at stateowned enterprises (particularly in energy and transport sectors) and reactivating the privatization program. An improvement in the absorption of EU funds will also play a center role in the future.

Assessment: a new deal with the IMF is good news for the capital markets, so we reiterate our forecast regarding an appreciation of the RON to 3.9 in June 2012.

Sursa: http://www.bcr.ro

Tags: arrangement stand precautionary

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