By Irina Savu and Adam Brown
Jan. 21 (Bloomberg) -- The International Monetary Fund said it will probably resume payments of its $30 billion bailout loan for Romania, frozen last year during political turmoil.
“We’re in discussions for the conditions for the disbursement” of more funds, Jeffrey Franks, head of an IMF mission to Bucharest, told reporters after visiting Romania’s central bank today. “I have reasons to believe it will go ahead.”
Teams from the Washington-based lender and the European Union started a seven-day visit to the Romanian capital yesterday to decide whether to resume payments of the loan, which also includes contributions from the World Bank and other international lenders. The package was frozen on Nov. 6 after the government collapsed because of infighting.
The IMF demanded the formation of a new government and the passage of the 2010 budget before resuming payments. Romania formed a government under Prime Minister Emil Boc on Dec. 23 and Parliament approved the spending and revenue plan on Jan. 14.
Standard & Poor’s on Jan. 13 said passage of the budget and resumption of the IMF loan may trigger an increase in Romania’s credit rating outlook. The EU’s second-poorest member is rated BB+ at S&P, the highest junk grade, with a negative outlook.
The Balkan nation is looking abroad to finance its shortfall to take advantage of improved investor sentiment after the new government was formed. Romania aims to sell 1 billion euros in euro-denominated bonds in the first quarter and more later in the year.
The leu, which has risen since lawmakers approved the budget, fell 0.1 percent against the euro to 4.1437 as of 12:50 p.m. in Bucharest today. The benchmark BET stock index fell 0.8 percent.
Franks earlier said Romania’s government may be able to use part of the next tranches of the bailout loan to finance the budget deficit.
“We’re going to discuss dividing the money in the coming days and no decision has been made yet on that,” he told Bloomberg.
When signing the loan agreement last year, the IMF stipulated Romania must place the money in central bank reserves. As the budget gap widened at the end of the year, the lender allowed half of the last tranche, a 1.9 billion-euro ($2.7 billion) installment paid last July, to be used to cover the shortfall.
The delayed tranche of 1.5 billion euros plus a payment of 800 million euros that was scheduled for March may be disbursed in February, the IMF said last week. The EU also said last week it will decide whether to send a delayed 1 billion-euro installment.
The budget approved by Parliament last week targets a deficit of 5.9 percent of gross domestic product, down from an estimated gap of 7.3 percent last year. Both figures comply with IMF conditions. The budget freezes wages for 1.3 million state workers, targets 100,000 job cuts and lowers infrastructure investments by 28 percent.