Thursday, February 26, 2009

Romania Aims for Foreign Loan, Finance Minister Says

By Irina Savu and Adam Brown

Feb. 25 (Bloomberg) -- Romania’s government will seek loans from abroad to help finance the planned 2009 budget and current- account deficits, Finance Minister Gheorghe Pogea said.

“We will take an external loan,” Pogea said on the sidelines of a seminar in Bucharest today. He gave no further details and didn’t say where the state will seek the loan.

Deputy Finance Minister Bogdan Dragoi said last week that the government plans to finance 30 percent of the planned 2009 gap, or as much as 4 billion euros ($5 billion), from foreign borrowing this year.

Eastern Europe’s governments are facing difficulties financing their budget deficits as investors shun riskier assets. Countries including Hungary, Ukraine and Latvia needed international aid to avert defaults and Romania’s government will decide this month whether to seek financing from the International Monetary Fund or the European Union.

The government aims to narrow the budget deficit to about 2 percent of gross domestic productstate wages. Romania, which had the fastest-growing economy in the EU in the third quarter of last year, predicts a sharp slowdown this year that will lower budget revenue. The IMF said this month that the country probably faces a recession in 2009. this year, from about 5.2 percent last year by freezing

Investment Projects

Transport Minister Radu Berceanu also said today that the government, which plans to devote 20 percent of this year’s spending to investment, aims to create a fund to buy 4 billion euros worth of land for investment projects.

Romania posted a current-account deficit of about 13 percent of GDP last year and it predicts a gap of less than 10 percent this year as a weaker leu discourages imports.

Standard & Poor’s said in a report yesterday that some eastern European nations, including Romania, are “facing despair” because of the global financial crisis and their external debt and current-account deficits.

At the same seminar as Pogea, Prime Minister Emil Boc said the government may accelerate plans to adopt the euro in 2014 to more closely link the country’s economy with other members of the European Union. He gave no further details.

“We should speed up the entry process,” he said.

Central bank Governor Mugur Isarescu has said the country needs to slow inflation to an annual 3 percent or 4 percent by 2010 to ensure euro adoption in 2014. The annual inflation rate rose to 6.7 percent in January from 6.3 percent in December.

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

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