Monday, November 9, 2009

Romania's IMF loan frozen amid gov't uncertainty

By Alina Wolfe Murray

Associated Press

BUCHAREST, Romania -- The International Monetary Fund said Friday that the it would delay access to a euro1.5 billion ($2.2 billion) bailout loan while the country struggles to set up a new government.

Speaking at the end of a visit to evaluate Romania's efforts to overcome its financial difficulties, IMF official Jeffrey Franks said the IMF could "proceed with the disbursement once the political situation is resolved."

Franks said for Romania to receive the money by the end of 2009, "quick action" is needed. "Time is running short," Franks said.

Speaking at a joint press conference with representatives of the European Commission and the World Bank, he said the review must be completed a week before the IMF board meeting on Dec. 10 to allow for the money to be disbursed by the end of the year.

Parliament dismissed the government of Emil Boc last month and lawmakers have this week rejected a government led by finance adviser Lucian Croitoru, nominated by President Traian Basescu.

Basescu on Friday nominated yet another prime minister -- Bucharest district mayor Liviu Negoita -- and said the IMF will return to Romania only after a legitimate government is in place.

The two-year IMF loan is part of a broader $26.4 billion package to which the European Union, the World Bank and the European Bank for Reconstruction and Development are contributing, among others. The money is made available in quarterly installments subject to the IMF's review of Romania's economy.

European Commission representative Elena Flores said that approval of a euro1 billion ($1.48 billion) loan from the EU could still take place by the end of the year. But disbursement will not happen this year.

Franks said the overall performance of Romania was satisfactory, adding the caretaker government could not submit the 2010 budget to parliament. Nor can it trim the deficit for 2010 to 5.9 percent of GDP -- a condition negotiated with the IMF. Other reforms needed, on pensions and fiscal responsibility law, are also awaiting approval.

Franks said the economic crisis in Romania is "severe," but the situation had improved. He predicted the economy might shrink by 7.5-8 percent, instead of 8.5 percent of GDP.

The IMF expects Romania's economy to grow in 2010 by an average of 0.5 percent, with slow growth in the first months, leading to "robust growth" by the end of 2010.

Franks warned that without additional measures, the IMF anticipate the budget deficit could reach 9 percent of GDP in 2010, far higher than the agreed target of 5.9 percent.

"The international community will continue to support Romania. But ultimately it depends upon Romanians to solve Romania's problems," he said.

It is unlikely Negoita has enough political support to be confirmed. Romania holds presidential elections on Nov. 22 and Basescu is running for a second five-year term.

No comments: