Thursday, July 8, 2010

AP: Romania says new IMF deal is needed

July 7, 2010

BUCHAREST, Romania --Romania needs a new deal with the International Monetary Fund, a standby loan to draw upon in case of need once the current loans expire, President Traian Basescu said Wednesday.

In 2009, Romania negotiated a euro20 billion ($25.16 billion) loan with the IMF, the European Union and the World Bank. The agreement ends next year. Part of the funds helped pay state wages and pensions last year, when the country's economy shrank by 7.1 percent.

"Categorically, Romania needs a new accord with the IMF," Basescu said in an interview with the public radio station. He said he would prefer a precautionary agreement, which would allow Romania to access funds only if it faces a critical situation.

He warned that a new loan would need to be used as investment rather than to help pay for pensions and wages.

"I would agree to a new loan in 2011, if all the money goes into development," Basescu said.

News agency Mediafax quoted IMF mission chief Jeffrey Franks as saying that a new accord with Romania could be a standby or precautionary type agreement. He said the government must give a clear signal for talks to start on the issue.

Last week, the IMF board approved to disburse an installment of euro913 million to Romania after the country adopted austerity measures to rein in the budget deficit to 6.8 percent of GDP. All public sector wages were reduced by 25 percent starting July 1, while the sales tax was hiked from 19 percent to 24 percent. 

No comments: