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| IMF Support for Romania |
| (2012-06-25) |
| Last updated: 2012-06-26 13:25 EET |
The IMF has approved the disbursement of a new installment, worth 500 million Euros, of the total amount stipulated by the 3.5 billion Euro precautionary agreement with Romania.Late last week, the IMF board unanimously approved the letter of intent submitted by the Romanian Government, drawn up after the formation of the government headed by the Social – Democrat leader Victor Ponta. This means that the 5th assessment of Romania’s performance under the stand by agreement was approved, just like the disbursement of a fresh installment, worth some 500 million Euros.
So far, the IMF has placed at the disposal of the Romanian authorities some 2 billion Euros out of a total of 3.5 billion, agreed upon under the precautionary loan agreement concluded in March 2011. So far, Bucharest has not resorted to these funds, which can only be used in exceptional circumstances. But how important are both this money and the agreement with the IMF? Analysts Constantin Rudnitchi is prompting an answer:
“ This agreement with the IMF was extremely important to Romania because, when it comes to funding, the IMF funds are the cheapest, in the sense that they can be obtained at the lowest interest rates. They are practically independent from the international market, from the high level of performance there, and even from rating agencies or other similar factors. This is the cheapest money that Romanian could have obtained.”
The IMF says Romania’s economic results, as stipulated in the agreement, remain solid, the GDP should grow in the second half of the year, inflation is under control, and the budget situation and that of the current account deficit continue to improve. Also, the IMF has called on the Romanian Government to be careful about expenses, as well as to implement reforms in the energy and transport sectors.
According to the press in Bucharest, although Romania’s macroeconomic indicators are relatively good, with a budget deficit falling into the range set together with the international lenders and an inflation rate under the values registered by most European countries, the targets regarding arrears and the reform in state-owned enterprises are far from being reached.
If the situation in Romania looks relatively good, in Greece, the new government headed by Antonis Samaras has called for a renegotiation of the austerity plan imposed by the EU and the IMF, it’s international creditors, and an extension of the implementation deadline by another two years.
The Greek officials also want to reduce the tax burden, to freeze layoffs in the public sector, additional assistance for vulnerable social categories and an extension of the period in which the unemployment rate is provided to 2 years. In the past 2 and half years, Athens has got massive aid: two loans worth 110 and 130 billion Euros respectively.
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