Wednesday, October 29, 2008

Romania Has `No Intention' of Borrowing From IMF

By Adam Brown

Oct. 28 (Bloomberg) -- Romania's government said it has ``no intention'' to borrow from the International Monetary Fund even after the lender offered support for neighbors Ukraine and Hungary to stem the effects of the global financial crisis.

``Romania has no intention to borrow from the IMF in the present context of the financial markets,'' Finance Minister Varujan Vosganian's press department wrote in reply to a Bloomberg e-mail today. ``Romania is not among the countries that currently negotiate loans with the IMF.''

The IMF is helping boost economies in eastern Europe as investors, stung by losses in developed nations, sell riskier emerging-market stocks, bonds and currencies. The lender is advising Romania on measures to shore up confidence in its markets after the currency fell more than any other in Europe over the past five days.

The IMF said earlier today it is in ``close dialogue'' with Romania though the Balkan nation is not asking for a loan. Iceland was the first country to get financing from the Washington-based lender during the crisis, while Belarus and Pakistan also asked for help.

``We do not have discussions about such financial support under way with Romania, but we maintain a close policy dialogue with the Romanian authorities,'' the IMF said in an e-mailed statement. ``Decision makers need to send a clear signal to the markets with wage and fiscal policies that are realistically attuned to a very difficult external environment.''

Bulgarian Meeting

Bulgarian Finance Minister Plamen Oresharski will meet with IMF officials at the end of this week ``as part of consultations on general policies and coordination of projections,'' he said in Sofia today.

The country, Romania's southern neighbor, has sufficient fiscal reserves, exceeding government debt, and ``has no intention'' to borrow from the IMF, he added.

Romania should scrap a 50 percent wage increase for teachers that was approved last week and rein in other government spending to cope with the global financial crisis, the Washington-based lender said.

The IMF has agreed to lend money to Ukraine and Hungary to shore up their economies amid the turmoil in global credit markets and slowing global growth. The lender yesterday said it would lend $16.5 billion to Ukraine for 24 months and will announce a ``substantial financing package'' for Hungary.

After the IMF statement today, Prime Minister Calin Tariceanu pledged to curb public wage increases and to refrain from raising state spending next year to keep the budget deficit in check.

Spending Freeze

``We decided to freeze public spending to the 2008 levels and wages will rise moderately next year because we have to tighten the purse strings,'' he told reporters in Bucharest. ``We have to cope with this difficult period.''

The Romanian leu has weakened about 12 percent in the past year and the benchmark BET stock index has dropped about 74 percent as investors shun countries seen riskier.

A government spending increase approved last week may cost 0.75 percent of gross domestic product, the IMF said, adding that extending the raise to all state workers may cost more than 4 percent of GDP in 2009.

Romanian President Traian Basescu yesterday said he favors a wage increase also for health workers. Tariceanu, his chief political rival, has said any raise would trigger demands and strikes from other state workers and ruin next year's budget. The government has estimated the potential shortfall at 7 percent of GDP, compared with a 2 percent goal.

Politicians are fighting over state wages ahead of parliamentary elections, a three-way fight between the opposition Social Democrat Party, Tariceanu's National Liberal Party and Liberal Democrat Party, which backs Basescu.

Sed Lex, the union that represents more than 100,000 public sector employees, said it will strike as early as this month to back a 50 percent raise for all its members.

To contact the reporter on this story: Adam Brown in Bucharest at abrown23@bloomberg.net

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