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| THE IMF LOAN AND THE WAY OUT OF THE CRISIS 07/08/2009 |
| (2009-08-07) |
| Last updated: 2009-08-10 11:25 EET |
The National Bank of Romania made at downwards revision of the inflation forecast for 2009 and 2010, from 4.4% to 4.3% for this year, and from 2.8% to 2.6% for 2010. According to the Central Bank Governor, Mugur Isarescu, the only spending that went up in Romania in the first 6 months of this year was on salaries and goods. He also said that saving increased, while consumption shrunk. Nevertheless, according to Isarescu, lending will be boosted because the Central Bank will continue to lower the minimum compulsory reserves imposed by the National Bank on commercial banks. According to Isarescu, higher excises on tobacco and the rigidity of the Romanian economy are the main elements that generate inflation. Isarescu also said that the difference between salaries and productivity dropped, after four years of growth, which he saw as a good sign.
The Central Bank Governor stated that he expected to see economic growth as of 2010, against the background of adjusted foreign deficit, higher productivity and a balanced budget structure. President Traian Basescu held talks with IMF representatives in Bucharest about the possibility of using the 2nd payment of the foreign loan to finance the budget instead of raising the Central Bank’s foreign currency reserves, as initially agreed.
The IMF experts suggested fewer salary increases and the reduction of certain expenditures as a simple solution to reducing the budget deficit. The IMF is willing to accept a budget deficit of up to 7.2% of the GDP. Therefore, the Romanian authorities need to reduce public spending by 0.9%, given that, according to experts, public spending has reached a level that cannot be supported, of 9% of the GDP. The Fund announced that it would be more flexible in its relation with Romania and stated that their intention was to assist Bucharest in solving not only the short-term problems but also in finding ways for economic recovery in the medium and long run.
The latest developments have been reported in the Romanian press: ‘’The Government and the National Bank of Romania finally accept the unacceptable: IMF money will cover the state employees’ salaries instead of covering the Central Bank’s reserves,’’ the daily Ziarul Financiar notes. ‘’Do whatever you want with our money,’’ Cotidianul headlines, saying that Romania is to see a real first in its relations with IMF. On the same topic, Evenimentul Zilei remarks that, ‘’the money from the IMF is making the Government lazier, while the Adevarul newspaper writes that the IMF ‘has been asked to pay people’s salaries.’’
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2025-04-03
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