Friday, January 21, 2011

World Bank Approves 300 Million-Euro Loan Payment to Romania

The World Bank agreed to disburse 300 million euros ($406 million) to Romania after the country passed wage and pension legislation last year to meet the terms of its international bailout agreement.

The Washington-based lender’s executive board approved the payment yesterday, the second from the 1 billion euros the World Bank contributed to a larger international loan awarded to the Balkan country in 2009 to help finance the budget, it said in an e-mailed statement today. The payment brings the total disbursed from the World Bank’s portion of the loan to 600 million euros.

Romania, the second-poorest European Union member, is missing out on Europe’s recovery after international lenders pressed the government to raise taxes, cut pension spending and reduce state wages to curb the deficit, sparking protests. The country passed a 2011 state budget, wage and a pension laws last year to qualify for the payments.

The loan “supports the government’s structural reforms in three key areas: improving fiscal sustainability, enhancing social protection systems and strengthening the financial sector,” the statement said. “While financing a relatively small share of the bailout package, the loan program targets structural reforms which will considerably improve Romania’s medium- to long-term outlook for sustainable development.”

The east European country may win a new two-year loan from the World Bank and a precautionary agreement from the IMF and the EU this year, World Bank European Country Director Peter Harrold told reporters in Bucharest on Jan. 18.

The remaining 400 million euros from the bank’s current loan is scheduled to be disbursed during 2011.

The last payment will probably be included in the next agreement, pending further changes in health care, welfare and taxation to boost budget revenue by as much as 20 percent over the next three to four years, Harrold said.

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez in Prague atjagomez@bloomberg.net

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