Romania to send letter of intent to the IMF

The Government on Wednesday approved a letter of intent to be submitted to the IMF with a view to concluding a new precautionary agreement with the international lender.

Valentin Țigău, 12.09.2013, 13:00

In July Bucharest authorities and the joint mission of the IMF and the European Commission to Bucharest gave the technical go-ahead for the signing of a new precautionary stand-by agreement, worth 4 billion euros. The Romanian Government on Wednesday approved the letter of intent, which marks the first step for signing a new stand-by agreement.

The board of the IMF will examine the letter this autumn. Meanwhile, Prime Minister Victor Ponta has announced that the main points of the new agreement will be presented to senators and deputies next Tuesday in a joint plenary session. Ponta has pointed out that the only price hikes agreed on with the IMF and the European Commission under the new accord will be targeting luxury products, to offset the recent cut in the VAT for bread, and also the health insurance levels for people with rental incomes.

Prime minister Ponta went on to say that the basic terms of the new agreement will be presented in full before the two chambers of Parliament, with all their risks and benefits. The IMF representatives conditioned the disbursement of the 4 billion euros on Romania’s stepping up reforms in the healthcare system and on its solving the issue of all pending privatizations of state-owned companies.

Moreover, the Romanian Government expressed its commitment to draft a bill by the end of the year, leveling the retirement age for men and women by increasing the retirement age for women, from 63 to 65 by 2030. According to Prime Minister Ponta, the agreement is on the one hand aimed as a fail-safe mechanism in case of a new economic crisis at Eurozone or global level and on the other hand at boosting reforms and adding to the economic stability of the country.

In turn, head of the IMF mission to Bucharest Andrea Schaechter has said that the new agreement is merely precautionary, given that the EU is still struggling to emerge from the recession. Romania’s previous stand-by agreement concluded with the IMF and the European Union, worth 5 billion euros, was also a precautionary one and expired in June 2013. As regards the economic growth forecast, the IMF estimates Romania’s GDP to go up to 2% in 2013 and to 2.25% in 2014.