Letter of Intent to the IMF

On Tuesday the Prime Minister of Romania Victor Ponta presented to Parliament the main elements of a new agreement with the European Commission, the IMF and the World Bank.

Valentin Țigău, 18.09.2013, 13:29

Upon presenting Romania’s new loan agreement with the IMF, the European Commission and the World Bank to the two chambers of Parliament on Tuesday, Prime Minister Victor Ponta explained that the document entails no obligation or intention to increase taxes. He asked for the MPs’ support for the Government’s efforts to close the deal, which would enable Romania to continue to borrow money from international markets at low costs. The agreement concerns a precautionary loan worth 4 billion euros. According to the Prime Minister, it is intended on the one hand to ensure support in the case of a new Eurozone or world financial crisis, and on the other hand to encourage reforms and contribute to the economic stability of the country. Victor Ponta:

“I believe that after the 2009 crisis, Romania is now recovering, in fiscal and budgetary terms, as our international partners have acknowledged, and I would like to be able to say, in two years’ time, that Romania needs no further agreements with the international financial institutions.”

In exchange for the loan, the international lenders have asked for reforms in the healthcare system and the privatization of state-owned companies. In the Parliament meeting, the representatives of the ruling Social Liberal Union appreciated the terms of the agreement, and said it was not a loan per se, but rather an umbrella agreement confirming Romania’s progress. The IMF has forecast a 2% increase in Romania’s GDP this year and a 2.25% growth next year. The deal is also backed by the Democratic Union of Ethnic Hungarians in Romania, in opposition, who argue that the precautionary loan is necessary and beneficial for the Romanian economy, because it ensures increased credibility while at the same time not burdening the taxpayers.

The main opposition party, the Liberal Democratic Party, believes on the other hand that it’s time Romania moved on from a safety-net agreement to a development agreement, able to stimulate the economy and create new jobs. The Liberal-Democrat Gheorghe Ialomitianu, a former finance minister, says the deal is a mere advertising move for the Government, proving its lack of responsibility. The agreement will be valid for two years. The letter of intent was sent to the IMF on September 12 and will be analyzed by the board of the institution this autumn.