Tuesday, March 10, 2009

Romanian State in ‘Preliminary’ Talks With IMF, EU

By Adam Brown

March 10 (Bloomberg) -- Romania’s government is in “preliminary” talks with international lenders including the International Monetary Fund and the European Union about financial assistance, the Finance Ministry said.

The central bank and Finance Ministry “started preliminary discussions with representatives of the European Commission, the International Monetary Fund and international financial institutions on the macroeconomic framework and potential financing needs,” the Finance Ministry said in an e-mail today.

President Traian Basescu and Prime Minister Emil Boc have said the government will seek international financing to support the current-account deficit as the global economic crisis makes international borrowing more expensive.

The government has not said how much financing it will seek. Central bank adviser Eugen Radulescu said last month the country needs 10 billion euros ($13 billion) in external financing.

Eastern Europe is set to slide into a recession, the IMF said on Jan. 29. Hungary, Ukraine, Belarus, Latvia and Serbia already have been given more than $35 billion in financing to prevent defaults and aid banks.

An IMF team will visit Romania between March 11 and March 25 to follow up on “an ongoing economic dialog” with authorities, the fund said in a statement yesterday. Discussions will cover “possible technical and financial support,” the statement said.

Wage Freeze

Romania’s government has already said it will freeze state wages until at least April, cut other expenses, raise some taxes and devote 20 percent of this year’s spending to infrastructure investments to cut expenses and stimulate the economy.

Tax revenue in the first two months of the year has fallen by about 9 percent as economic growth slows, the Finance Ministry has said. Economic growth slowed to 2.9 percent in the fourth quarter of last year from 9.2 percent in the third and the IMF predicts the country will enter a recession this year.

“External financial assistance and the proactive measures of Romanian authorities constitute a guarantee for strengthening financial stability, in the medium-term,” the Finance Ministry said in today’s e-mail. “On the long term, the conditions needed for benefiting of economic growth opportunities are met.”

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

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