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Jeffery Franks on the conclusion of a recent evaluation mission conducted by the IMF and the EC

The head of the International Monetary Fund (IMF) mission Jeffery Franks made some statements at the end of the third evaluation under a precautionary stand-by arrangement between Romania and the IMF, carried out October 25 - November 7 in Bucharest.

The evaluation was conducted by a joint team of the IMF, the European Commission and the World Bank.Thus, according to him, the projected 2011 economic growth for Romania will be kept at 1.5 percent, backed by strong exports and bumper crops.

He added that the IMF is anticipating the economic growth will be 1.5 percent in 2011, backed by strong exports and good agricultural results, but the prospects for 2012 have worsened and the economic growth projection now is between 1.8 and 2.3 percent, conditional on the developments in Romania's absorbing European funds. He added that more important thing will be for the Government to follow a prudent policy and it is vital for Romania to consolidate its efforts to draw in European funds. Increased spending from European funds, he said, could boots the economy without burdening the public finances. This, he said, is all the more important as financial difficulties will lead to restrictions in public spending.

'The governments should back public investments by European funds. Once the co-financing part was reduced and the VAT was reimbursed, the capacity to draw European funds went up. The actual absorption is still disheartening. Although the European funds are unemployed, new projects spring up which might be funded by or outside the budget. They must be evaluated so that they should be prioritized afterwards. It is vital that Romania should stop wasting the European funds,' said Jeffrey Franks.

The IMF mission chief showed that a second challenge for Romania, apart from the European funds, is to make the health system more efficient. 'In order to create this system, the desired level of services to provide the needs should be attained and enough resources from the budget and social contributions should be provided. This system cannot be administered without enough financial resources,' the chief of the IMF mission in Romania explained.

The third issue is to clear arrears, according to the IMF chief. 'The authorities eliminated almost entirely the arrears of the state budget and those of the social security All targets have been met. The executive is focusing on those at the state-owned companies, which represent 4 percent of the GDP and a stumbling block for economic growth,' Jeffrey Franks explained.

Franks also said that the IMF and the Romanian Government agreed to keep the deficit target at 3 percent in ESA terms.

Inflation, he said, declined significantly because of better crops and the IMF is expecting it to further fall. The fiscal deficit was agreed to be cut down to below 3 percent in ESA terms, because, he argued, it is essential for Romania to reduce its vulnerability to the situation elsewhere in Europe. The Romanian authority should strictly limit spending outside the Budget, he added, mentioning that the IMF and the Romanian Government agreed on a freeze on the nominal value of public wages and pensions. The budget is prudent and the agreement is that the public wages and pensions will increase in mid-2012 if the market conditions allow.

If the IMF Board of Directors approves the third evaluation, the IMF will disburse a new tranche of financial assistance worth 475 million euros for Romania.

Sursa: http://www.actmedia.eu

Tags: funds public should budget percent european evaluation mission romania franks

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