| DEFICITS, INCOMES, INFLATION 02/03/2010 |
| Last updated: 2010-03-03 15:33 EET |
Last week, the IMF disbursed the third and fourth installments, worth 2.3 billion Euros, of the loan provided for in the stand by agreement with Romania. The money went to the National Bank’s national reserve account and to the treasury fund, to cover part of the budget deficit. Another payment is to be made by the European Commission in March, worth one billion Euros. The total funding package provided by the IMF, the EU, the World Bank and the European Bank for Reconstruction and Development will reach 19.95 billion Euros.
As Romanian Finance Minister Sebastian Vladescu has stated, the terms are known: 5 years maturity on the IMF loan, 7 years on the loan given by the European Commission and an interest (of 3.5% per year) below the market value. “There are special conditions regarding the implementation of some laws that are crucial for improving the budget, the pension system, controlling expenditure. Some of those laws are already being debated by Parliament” Sebastian Vladescu also said.
Technically speaking, the interest rates at which Romania buys credits are getting smaller. At the same time, the amounts of money that we attract from the market, to ensure medium and long term funding, are smaller, which renders available financial resources for the Romanian private sector. Therefore, from the Finance Minister’s point of view, that is one of the best measures to support the Romanian economy in these times of crisis.
Attending the Economic Forum in Davos, Switzerland, in late January, the former chief economist of the IMF, Kenneth Rogoff said that several European countries, including Romania, could default on payments, despite the support they got from the IMF. However, Romanian Finance Minister, Sebastian Vladescu and Romania’s representative to the IMF, Mihai Tanasescu have rejected that statement. Sebastian Vladescu:
“ I don’t know on what grounds that statement was made. Our calculations indicate that this year Romania has no problems paying salaries, pensions and debts. Therefore, I really don’t know what calculations he made. At the moment, the treasury is quite balanced and I see no financing problem. With the payments from the IMF, the World Bank and the European Commission this year is a stable one.”
Mihai Tanasescu, Romania’s representative to the IMF, claims there is no question of our country defaulting on a loan.
“I don’t know what survey Mr. Rogoff looked at, but such a thing is impossible. Given that the current account deficit for 2009 was recalculated at less than 5 percent, that the Central Bank has reserves of some 28-29 billion euros, and policies right now are aimed at consolidation, at gradually reducing the deficit through well-delineated funding, I believe that Mr. Rogoff’s conclusion was hasty.”
Also in late January, Chief of the IMF Mission to Romania Jeffrey Franks said that the Romanian government’s reaching the targeted budget deficit value for 2009, that is 7.2 percent of the GDP, as well as envisaging a 5.9 per cent budget deficit for 2010, had contributed to the IMF’s and the European Commission’s disbursing the funds. Jeffrey Franks believes that Romania will record an economic growth of 1.3 percent in 2010, and an even larger one next year if the IMF’s forecast comes true.
Romania’s commercial deficit in 2009 totaled 9.7 billion euros by 58.6 percent lower than in 2008. We should note that in 2009, imports went down 2.3 times as fast as exports, according to data provided by the National Institute of Statistics. Exports dropped by nearly 14 percent in 2009, to a total value of 29.1 billion euros, while imports dropped by 32.3 percent to 38.8 billion euros. The annual inflation rate also went down, from 6.3 percent in 2008 to 4.74 percent in 2009. The National Bank of Romania forecasts inflation rates of 3.5 percent in 2010 and 2.7 percent in 2011.
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2010-09-06
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