The International Monetary Fund today approved a $1.17 billion disbursement to Romania after reviewing the country’s progress in meeting terms of a $17.45 billion loan.
“Policy implementation under the fund-supported arrangement has remained strong,” John Lipsky, the IMF’s first deputy managing director, said in an e-mailed statement after an IMF board meeting. “Romania is now on a clear path to meeting its short and medium-term fiscal goals.”
Romania, which has been relying on a 20 billion-euro ($25.9 billion) bailout led by the IMF to stay afloat, passed a 2011 budget with a deficit of 4.4 percent of economic output as agreed with the Washington-based lender, as well as key wage laws in December to qualify for the payment.
“The current challenge is to fully implement the approved reforms and maintain tight control over expenditures to assure that the budget parameters are observed.” Lipsky said.
Romania’s economy is mired in the worst recession in 20 years. The government has raised the value-added tax rate by 5 percentage points and cut public wages by 25 percent to squeeze the budget gap to 6.8 percent of gross domestic product in 2010. The retirement age was also raised to 63 for women and 65 for men.
The IMF’s approval paves the way for Romania to receive another 1.5 billion euros from theWorld Bank and the European Union by the end of March as part of the bailout loan.
The Romanian government is considering taking a new precautionary loan from the IMF in April to strengthen its credibility and streamline its fiscal system. The current loan ends in May and the central bank said yesterday that parameters for a new credit were set at a meeting with Cabinet officials yesterday.
Details of the agreement were not released. The credit line may be about 3.6 billion euros and tapped in case of an emergency, Mediafax newswire reported yesterday, citing unidentified government officials.
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