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Next review of Romania's economic program scheduled for Oct/Nov 2011

The joint European Commission (EC) and International Monetary Fund (IMF) expert teams that have been visiting Bucharest over July 20 - August 1 for the regular quarterly review of Romania's economic program found the program remains on track, that all performance criteria set for the end of June were met and the authorities have steadfastly implemented program policies.

According to experts of the two institutions, policies are being strengthened to better position Romania to weather financial market volatility.

As a release posted on the website of the European Commission's Representation in Romania informs, the EC and IMF continue to project real GDP growth of about 1 percent this year. While the contribution to growth by absorption of EU structural funds remains low, a good harvest is expected and exports remain strong, the release further reads.

In 2012, economic growth projections stand between 3 and 4 percent contingent on improved domestic demand, including better absorption of EU structural funds. Inflation is expected to come down, but will remain above the National Bank of Romania's 2011 inflation target. It is projected to further decline to about 3 percent in 2012, whereas the current account deficit is expected to remain around 4 percent of GDP.

The next review of the program is scheduled for late October/early November 2011.

The program's objectives are to strengthen economic growth, while maintaining at the same time financial and macroeconomic stability.

This was the second review of Romania's Stand-By Agreement with the IMF. Depending on the completion of this review by the IMF Executive Board, the third tranche worth SDR 430 million (approximately EUR 480 million) will be made available by the international financial body. Yet the authorities have decided to handle this agreement as a precautionary type arrangement, which means that they do not intend to draw these amounts. The next meeting of the IMF Executive Board Meeting is scheduled for end-September.

State companies arrears at cemtral administration level exceed 20 billion lei

State companies arrears at the central administration level are over 20 billion lei (around 4.7 billion euros), and arrears of state companies at local level are also considerable, said on Monday, in a press conference, the International Monetary Fund (IMF) Mission head, Jeffrey Franks.

The International Monetary Fund (IMF) considers that the main directions of action for the Romanian authorities in the coming period so as ensure sustainable economic growth should be healthcare, addressing the issue of arrears, public investments and the sector of state-owned companies, said head of IMF mission to Romania Jeffrey Franks.

'We need to focus our efforts towards ensuring a sustainable economic growth by removing structural barriers to growth, while boosting at the same time investment and creating jobs. The so hard gained benefits generated by the implemented policies must not go waste either,' Jeffrey Franks on Monday told a press conference.

The IMF representative said that a fundamental rethinking of the public services and the financing to the healthcare sector will be essential for deciding what services the public healthcare sector can afford to provide, and on the role of an extra private insurance policy covering the services and drugs that are not under the blanket insurance provided by the state.

In the coming months, the government will prepare a final reform proposal and until then some urgent measures need to be reached to ensure the footing of the bills and provision of services to those who need them, advised the head of IMF mission.

Another essential challenge is doing away with the recurring issue of arrears. The authorities have almost completely removed arrears from the state budget and the social security budget and an inventory of unpaid bills registered with local authorities, self-financed entities and state-run enterprises was carried out.

'This exercise has shown that arrears with central state-owned enterprises alone amount to over RON 20 billion. Arrears of local state-owned enterprises are at a considerable amount too. These unpaid bills are a major hindrance to growth because the companies owing these amounts do not have money for investment, just like the companies at the receiving end have no money either. The government has made progress in devising ways to possibly reduce arrears. This will imply financial restructuring measures, but also reforming the respective companies, so as to trim wasteful spending and government resources be more efficiently directed to those in highest need for services. These measures will make sure that no other arrears appear and that the little money of the taxpayers is made best use of,' the IMF official said.

In the opinion of the official of the international financial institution, another area of concern is the increase in public investment spending, while keeping within the same budget envelope. The primary objective to this end should be boosting the absorption of EU funds.

The most difficult challenge to economic growth - cautioned the IMF official - is implementing deep-going reforms with state-owned enterprises, which require a substantial injection of capital and private management to revive them.

'This is essential in particular for growth-generating sectors such as energy and transport,' the IMF representative also said.

The authorities have pledged to appoint at the helm of the largest companies independent executive managers from the private sector and this process will take place in the coming months, with the new directors due to fill these positions in 2012.

Jeffrey Franks also insisted on the importance of further ensuring fiscal discipline, especially at a time when the financial market is marked by uncertainty and contagion risks are higher. In this sense, maintaining the commitment to further reduce the fiscal deficit in 2012 to less than 3 pct of GDP is crucial.

'Together with the authorities we have worked on outlining the parameters for a budget capable to meet this goal and we expect to agree on the details of the budget in the months to come. Efforts are still required to ensure that pressures for spending are kept under control and the government more efficiently uses the available resources,' concluded the IMF official.

Sursa: http://www.actmedia.eu

Tags: state these companies arrears budget services growth financial economic romanias program scheduled authorities international review

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