The IMF mission in Romania

IMF officials provide an update on Romania's standby agreement.

Corina Cristea, 04.02.2014, 13:22

The priorities of the economic reforms and the legal framework with an impact on the economy were the main topics of the talks held by representatives of international loaners in Bucharest in the last couple of weeks with the president and the prime minister, representatives of political parties, trade unions, business associations, banks and civil society organizations. The visit was aimed at assessing the precautionary accord the IMF board concluded with Romania last autumn.

The two-year accord amounts to about two billion Euros, to which adding up are another two billion Euros from the European Commission. At the end of the discussions, the international financial experts spelled out their conclusions and made a few recommendations to Bucharest, including a higher European fund absorption rate and solutions to increase consumption. The IMF forecasts a 2.2% economic growth rate for Romania; last year, Romania reported a 2.8% economic growth rate, the biggest since the onset of the crisis.

A good agricultural year and exports were some of the factors triggering that growth; on the other hand, the lower energy imports sparked off a lower current account deficit. The 2014 budget focuses on investment; one of the priorities is the development of infrastructure, which has been appreciated by international loaners. They are also optimistic about the historic low interest rates of Bucharest’s loans and about the fact that Romania might become an energy exporter, which could entail new jobs.

A solution has also been found to one of the issues in dispute between president Traian Basescu and the government headed by Victor Ponta, namely the issue related to the increase of the fuel excise tax by 7 eurocents, scheduled for the beginning of this year and postponed by three months following the president’s refusal to sign the 2014 state budget. The measure is not laid down in the letter of intent to the IMF, but it will be applied as from April 1st, both for petrol and Diesel oil. The Prime Minister has announced that the international partners agreed to two decisions with an impact on the economy. The first measure targets people with credits.

So, pensioners or employees with a monthly income of 1,610 lei, about 360 Euros, and with overdue debts no longer than 90 days will have their instalment halved for a two-year period. The second measure will be applied in the private sector as from July 1st. In this case, the state will pay half of the total wages to the companies creating at least 20 jobs.