Thursday, September 1, 2011

Romania May Have Insufficient Funds for IMF-Mandated Buffer

Romania may be short of funds to cover a four-month financing buffer requested by the International Monetary Fund if Europe’s sovereign-debt crisis pushes up yields, Finance Minister Gheorghe Ialomitianu said.

The Balkan nation will probably have to pay more to finance its budget deficit “if the markets don’t calm,” Ialomitianu said at a conference today in Bucharest.

“We have a buffer, I don’t know if it covers financing for four months, but we can face difficult situations,” Ialomitianu said. “We are still in a position that allows us to reject the offers which we consider to be priced too high.”

The Finance Ministry sold 2.6 billion lei ($877 million) of leu-denominated bills and bonds in August, below the 4 billion lei planned, as investors pushed for higher yields amid concern over lower-than-expected global economic growth.

Average yields of one-year leu-denominated bills rose to 6.64 percent from 6.18 percent and three-year bond yields to 7.34 percent from 7.09 percent, according to central bank data.

The government, which seeks to avoid drawing on a precautionary loan from the IMF and the European Union, has cut wages and the workforce in the public sector. It aims to bring thebudget deficit below 3 percent of gross domestic product next year, from an estimated 4.4 percent this year.

The plan is to borrow 4.7 billion lei in bills and bonds on the domestic market this month and international markets may be tapped for the second time this year as part of a 7 billion-euro ($10 billion) medium-term notes program that runs until 2013.

To contact the reporter on this story: Andra Timu in Bucharest at

To contact the editor responsible for this story: James M. Gomez at

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