Thursday, March 19, 2009

Romania: to get euro18-20 billion in IMF-led bailout

(AP:BUCHAREST, Romania) Romania will get an emergency loan for euro18-20 billion ($24-26 billion) from the International Monetary Fund, the European Union and the World Bank to survive the global economic crisis, a Romanian official said Wednesday.

Although a final agreement has yet to be announced, Mihai Tanasescu, the country's representative to the IMF, said the deal is imminent and will help stabilize and boost the economy.

An IMF delegation is currently on a visit to Romania to discuss the loan.

Prime minister Emil Boc said Wednesday that two-thirds of the loan will go to the National Bank, to boost foreign currency reserves and keep the national currency, the leu, at a level that will not hurt the economy. Another part of the bailout funds will go to commercial banks to support mortgages and other loans.

Tanasescu warned economic activity would slow further in April but that if the government manages the loan well, the economy would gradually improve.

He tried to ease fears that taxes will rise as a result of the loan and said that the social implications of the economic crisis _ such as higher unemployment and cost of living _ were an important issue in the negotiations with the IMF.

Romanian President Traian Basescu, Prime Minister Emil Boc and National Bank Governor Mugur Isarescu met with IMF officials on Tuesday to discuss the loan.

Basescu has said that money from the IMF is the "cheapest that Romania could receive."

The country's central bank warned last month that it might need help to shore up its foreign currency reserves, which amounted to euro26.2 billion ($33.2 billion) in December.

Financial analysts have said the expected influx of capital from the loan should calm fears of an immediate meltdown in the economy and could lead to a near-term bounce in Romanian markets. However, it won't eliminate the need for a fundamental depreciation in the leu, they say.

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