Thursday, October 29, 2009

IMF starts Romania aid review, seeks political support

BUCHAREST, Oct 28 (Reuters) - An IMF mission begins a second review of Romania's aid package on Wednesday and a Fund official was quoted as saying the lender would look for broad political support for keeping the agreement going.

The International Monetary Fund, which oversees a 20 billion euros loan package for Romania, relented on plans to postpone the visit until a new government was formed. The centrist minority government collapsed in a confidence vote earlier this month.

A staff mission will review progress made in meeting conditions attached to the deal, together with teams from the European Commission and the World Bank, which have contributed funds to the overall package.

Under the terms of the deal, Romania must enforce sharp cost-cutting measures to rein in budget spending.

'Basically, (the IMF) will check if these factors (finance ministry, central bank, political parties) have the determination to meet commitments,' Mihai Tanasescu, Romania's IMF representative was quoted as saying by daily Gandul.

'It will verify just how much we want to carry this agreement to term.'

Earlier this month, IMF mission chief for Romania Jeffrey Franks said a follow-up mission may be needed once Romania has a new government. The disbursement of a third tranche worth 1.5 billion euros by the end of 2009 hinges on the review.

On Wednesday, parliament holds hearings of the proposed cabinet of designate prime minister Lucian Croitoru, but his chances of securing parliament support were slim.

While Romania has met some of the IMF conditions, including a third quarter budget deficit cap, it still needs to approve a 2010 budget plan with a deficit of no more than 5.9 percent of gross domestic product from a goal of 7.3 percent this year.

It also needs to issue a fiscal responsibility law and a pension bill by the end of 2009.

Tanasescu said the 2010 budget was a major concern for the mission, and the timely disbursement of the third tranche depended on it, but that the Washington-based lender might be willing to show flexibility on other deadlines.

'It is not the end of the world if the IMF calendar isn't strictly respected. The agreement is valid and will be valid.'

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