Wednesday, January 30, 2013

IMF Mission to Propose Romania Accord Extension on Reform Delays

By Irina Savu & Andra Timu - Jan 29, 2013

The International Monetary Fund extended a review of Romania’s loan accord until the end of June, after Prime Minister Victor Ponta asked the lender to prolong the agreement to complete more reforms.

The IMF’s board will meet in June to decide on Romania’s progress under the accord, which will bring the current review to completion, Mission Chief Erik de Vrijer said in Bucharest today. The Balkan nation must sell minority stakes in some energy companies, such as Transgaz SA (TGN) and Complexul Energetic Oltenia SA, before the Washington-based board meeting, he said.

“Because there were some misses on targets and there were delays in structural reforms, the government has asked to extend the accord by three months and we have agreed to ask our board to grant this request,” de Vrijer said.

Romania, which is counting on the 5 billion-euro ($6.7 billion) precautionary loan from the IMF and the European Union to act as a safety net against the European sovereign-debt crisis, still needs to sell 15 percent stakes in Transgaz and natural-gas company Romgaz SA, a 10 percent stake in Nuclearelectrica SA and select a manager for the sale of a 15 percent stake in Oltenia. It must also pay some overdue debt to the private sector as part of its pledges.

The IMF cut its economic growth forecast for Romania to almost zero in 2012 from a previous estimate of 0.9 percent and to 1.5 percent for this year.
Deficit Overshoot

Romania’s 2012 budget deficit totaled 14.8 billion lei ($4.5 billion), or 2.5 percent of gross domestic product, exceeding the cash target set under the accord with the IMF, while meeting a target under European accounting standards. De Vrijer said the mission will ask the board to grant Romania a waiver for the budget gap overshoot, which was due to technical payment delays related to EU funds.

The eastern European country plans to negotiate a new precautionary accord with lender, “immediately” after completing the current one, Ponta said on Jan 25. Romania relied on a 20 billion-euro loan from the lender between 2009 and 2011 to help it emerge from a two-year recession and withstand external shocks from the global financial crisis.

The country hasn’t drawn any money from the current precautionary accord, which isn’t off track because of the extension, Ponta said yesterday.

Romania must also sell a majority in rail freight company CFR Marfa SA to a strategic investor before the end of June.

During the mission ending today, the IMF and the EU helped the country outline the 2013 budget, which still needs Parliament’s approval. It targets a budget deficit of 2.1 percent of GDP.

To contact the reporters on this story: Irina Savu in Bucharest at; Andra Timu in Bucharest at

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

No comments: