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IMF unlocks third EUR 480 mn tranche for Romania

The International Monetary Fund's Executive Board approved on Thursday the second review of the precautionary agreement and will unlock for Romania the next tranche worth EUR 480 million.

'Today's decision by the executive directors is a positive one. The unanimous vote for the second review of the agreement is encouraging and shows that in these three years, Romania has succeeded in carrying out powerful structural adjustments that enhanced its preparedness for external shocks. Romania should however be cautious of international turbulence and this sovereign debt crisis that creates vulnerabilities for the country,' Romania's representative to the IMF, Mihai Tanasescu, told Agerpres.

Tanasescu added that the IMF message was highly positive, encouraging at the same time Romania to continue reforms, strengthen financial discipline in state-owned companies and reduce arrears.

This is the third loan tranche the IMF makes available to Romania for emergencies; the first was EUR 67 million, the second around EUR 475 million.

In March 2011 the authorities in Bucharest decided to extend the agreement with the IMF through a precautionary credit line worth 3.09 billion SDRs (around EUR 3.5 - 3.6 billion), or 300 pct of Romania's share with the IMF. The new agreement with IMF is accompanied by a EUR 1.4 billion preventive support from the European Union and a WB loan worth EUR 400 million.

Please read the IMF Press Release as following:

IMF Completes Second Review Under Stand-By Arrangement with Romania

The Executive Board of the International Monetary Fund (IMF) today completed the second review of Romania's economic performance under a program supported by a 24-month Stand-By Arrangement (SBA). The authorities have indicated that they will continue treating the arrangement as precautionary and therefore do not intend to draw under it.

The SBA was approved on March 25, 2011 in the amount of SDR 3,090.6 million (about €3,561 million* or about US$4,854 million). The SBA came into effect on March 31, 2011. Completion of the review makes an additional amount equivalent to SDR 430 million (about €495 million or about US$675 million) available for disbursement, bringing the total resources that are currently available to Romania under the SBA to SDR 920 million (about €1,060 million or about US$1,445 million)

Following the Executive Board's discussion on Romania, Mr. David Lipton, First Deputy Managing Director and Acting Chair, stated:'Romania has made good progress under the new Stand-by arrangement. Policy implementation has remained strong and all performance criteria were met. The authorities' commitment to continued reform has helped restore market confidence and economic stability. Steadfast commitment to the economic reform agenda is crucial to safeguard these economic gains and better withstand shocks in an uncertain global environment.

'The authorities are on track to meet their fiscal targets for 2011. However, achieving the deficit target for 2012 remains challenging. More comprehensive action is needed to secure the financial sustainability of the health care sector. Faster progress is also needed to improve Romania's capacity to absorb EU funds. Deeper reform of state-owned enterprises—together with enhanced regulation and improved market-oriented pricing—will be essential to improve economic efficiency and boost growth.

'The banking system remains liquid and well-capitalized, but risks have risen due to difficulties elsewhere in Europe, and increased supervisory vigilance is warranted. Enhanced monitoring and detailed contingency plans—including procedures for using the newly enhanced bank resolution powers—are needed to guard against possible contagion. Monetary policy remains appropriately cautious in light of lingering inflation risks', Mr. Lipton said.

*All amounts exchange rates of September 28, 2011

Sursa: http://www.actmedia.eu

Tags: romania million economic about second under tranche review euro

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