Tuesday, November 8, 2011

IMF, Romania Agree on Next Loan Tranche, 2012 Budget Limits

Romania and the International Monetary Fund completed talks after a two-week review to unlock about 475 million euros ($652 million) in funds and reached agreement on a target for next year’s budget.

A joint IMF-European Union mission finished reviewing Romania’s progress under a 5 billion-euro precautionary accord today and will recommend that the Washington-based board unlock a fourth installment. The Balkan nation met all its targets at the end of September and plans to push ahead with a state-asset sale program that so far has produced “unsatisfactory results,” IMF mission chief Jeffrey Franks said at a news conference in Bucharest today.

“We are not talking about radical cuts” to meet the 2012 budget deficit target of 2.1 percent of gross domestic product under Romanian accounting standards, Franks said. “We are talking about holding wages at the current level and continuing the natural process of attrition to continue to bring down the size of the public sector.”

Romania plans to reduce its budget deficit to between 1.9 percent and 2.1 percent of GDP, under Romanian Accounting Standards, from an anticipated 4.4 percent this year as it seeks to limit its financing burden amid Europe’s sovereign-debt crisis and a slowdown in global economic growth. It doesn’t plan to draw on the precautionary funds, which will be stored by the IMF in Washington for emergency needs.
Slowing Recovery

The country’s export-driven economic recovery will slow next year to growth of between 1.8 percent to 2.3 percent, compared with a previous forecast of 3.5 percent as it counts on western Europeans to buy its manufactured goods such as Dacia cars, Franks said.

Prime Minister Emil Boc’s government will try to push ahead with a plan to sell minority stakes in state-owned companies, such as Transgaz SA, Transelectrica SA (TEL) and Romgaz SA, and majority stakes in Oltchim SA and newly-formed power companies Oltenia SA and Hunedoara SA, even during a time of market turmoil that led to the failed sale of a 9.8 percent stake in OMV Petrom SA (SNP) in July.

To contact the reporters on this story: Irina Savu in Bucharest at isavu@bloomberg.net; Andra Timu in Bucharest at atimu@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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