A look at the recent IMF assessment mission in Bucharest.
The joint IMF, European Commission and World Bank mission drew to a close around two weeks ago, but comments and opinions on the mission have never ceased to be made public ever since. First off, the mission left Bucharest without the usual letter of intent, while talks with the Romanian authorities are to be resumed in April. Actually, there were two problems to which no solution was found during the talks between the two parties: a sweeping overhaul of the coal-based energy companies Hunedoara and Oltenia and the natural gas price increase for domestic consumers, an increase that international experts asked for.
Prime Minister Victor Ponta: ”Specifically, the demand made by the European Commission and the International Monetary Fund delegation targeted a hike of the gas price for domestic consumers, as of April the 1st, from 53.3 lei per MW to 62 lei, an increase we think is unsustainable. As for the second point we failed to agree upon, related to the two companies which are still left, the National Company Hunedoara and the Company Oltenia, the demand of the European Commission, the International Monetary Fund and the World Bank referred to a large-scale and sweeping reorganization, which from our point of view can save neither the coal-based energy industry nor the jobs, but it could get them into a spiral that in a few years’ time will lead to the major reduction of that sector in Romania.”
After the international lenders’ delegation had left Romania, the president of the Chamber of Deputies’ Budget and Finance Committee, Social-Democrat Viorel Stefan said that in the following period, talks between the Romanian and international experts would mainly be focusing on harmonizing the divergent standpoints.
Viorel Stefan: ”The agreement is still in effect. The fact that no letter of intent was signed means a temporary suspension is kept in place until government experts and experts of the international institutions reach an agreement on the issues which had not been harmonized within the mission.”
A representative of the opposition, liberal deputy Gheorghe Ialomitianu, former finance minister, believes the negotiations with the IMF are a failure of Victor Ponta’s government.
Gheorghe Ialomitianu: “The Monetary Fund tells us the current government did not abide by its commitment, while the government tells us everything is just fine, so we’re in a delicate position, in a deadlock, and for Romania, that is something bad, since a message is conveyed to international lenders on the foreign markets, which is not so good. It also gives rise to a certain uncertainty for the business environment, for everything.”
The agreement Romania signed with the IMF is a precautionary one; it stands at 2 billion Euro and expires this coming fall. We should also note that our country did not make use of any sum of money the agreement made available. Despite the fact that no letter of intent was signed, the joint IMF, European Commission and World Bank delegation issued a press release, saying Romania made the required adjustments with respect to most of the problems triggered by the economic crisis, but the poor public infrastructure is a serious stumbling block for Romania’s development. Also, despite satisfactory macroeconomic developments, as of late Romania has failed to bridge the gaps separating it from the developed countries, and continues to be vulnerable to shocks coming from the outside. The president of the Fiscal Council, Ionut Dumitru said opinions voiced by international experts had pointed to what our country should do, in order to secure an even stronger economic growth.
Ionut Dumitru: ”In terms of economic growth, it was underscored that the economy had emerged out of recession, it had made up for the contraction during the crisis, it does have a fast pace, yet not strong enough to enable us to have an even faster convergence; it was also pointed out what we also had to do in order to speed up the economic growth, first off, prioritized investments in infrastructure and at the same time the absorption of European funds. As regards the fiscal policy, if we want to cut some of the taxes without increasing others, we are compelled to obtain noticeable results when it comes to tax collection, in terms of the efficiency with which we spend the money, and let me just tell you we’ve got a huge efficiency potential for all kinds of spending.“
Economic analyst Aurelian Dochia expressed his opinion on the need for a new stand by agreement to be concluded with the International Monetary Fund this coming fall.
Aurelian Dochia: ” Romania could consider such an option, as soon as the present stand by agreement expires, provided everything runs smoothly, on a domestic as well as international level. If we no longer have the stand by agreements with the Fund, the question still remains as to what sort of economic policies the governments will adopt, when they are no longer subject to the IMF’s constraints. Our history in the past 20 years tells us there is some kind of risk in this respect, but eventually I think that stand by agreements are bound to be eliminated, and we must stand on our own feet.”
The IMF’s estimated growth forecast for Romania’s GDP stands at 2.7 % for 2015 and at 2.9% in 2016. The main factor triggering such a growth is the consolidation of private consumption against the backdrop of a net salary increase, a drop in crude oil prices and an all-time low interest rate.
Useful Links
Copyright © . All rights reserved