The Financial Times
By Thomas Escritt in Bucharest
Published: March 10 2009 00:40 | Last updated: March 10 2009 00:40
Romania could receive about €20bn ($25.3bn, £18.3bn) in an International Monetary Fund-led rescue package as the result of negotiations between Bucharest and the IMF due to resume on Wednesday.
The multilateral support package, aimed at averting an economic crisis in one of the European Union’s poorest member states, is likely to be similar in size to the €20bn made available to Hungary in November, according to an official familiar with the issue.
The Romanian government and the IMF had reached agreement on the “broad quantitative parameters” of a support package during last week’s visit of a Romanian government delegation to Washington, the official said. Over the next 10 days, experts from the institutions involved, which include the IMF, the European Commission and the World Bank, will be in Romania to tie up the final details.
“The deal will give Romania time to implement the policies ... without looking over their shoulder to see if a crisis is coming,” the official said.
The Romanian government has given no indication of the likely size of the rescue package.
Romania’s move makes it the fourth east European country after Hungary, Ukraine and Latvia, to turn to international institutions for support since the onset of the financial crisis.
The package will run for a longer period than the 17-month facility made available to Hungary, the official, said, without elaborating.
The European Bank for Reconstruction and Development and the European Investment Bank will also contribute, by providing financing to the country’s private sector and financial institutions. The EBRD has been reported to be in discussions with Banca Commerciala Romana, the country’s largest bank and also the single largest subsidiary of Austria’s Erste Bank over a loan of up to €150m.
News of the package will come as a relief to Romania’s finance-starved private companies, many of which complain of difficulties in accessing credit.
Dan Constantinescu, head of Unicredit Leasing in Romania, said last week that an IMF deal was needed to help sustain flows of financing into the country. “My expectation is that if we sign an IMF deal our credit default swaps spreads will improve, making lending far cheaper for us.”
Liviu Voinea, an economist at the Group for Applied Economics, a Bucharest-based consultancy, said: “We need the money from the IMF but we should use it as an opportunity to run a larger budget deficit of 4 per cent of gross domestic product. If we cut spending as the economy slows, we will have a much severer recession.”
The government is targeting a budget of 2 per cent of GDP for 2009.