Wednesday, July 17, 2013

AFP: Romania seeks new round of IMF cure

Romania is seeking a new deal with the IMF following the austerity prescription that shocked the economy back into health, the country's Finance Minister Daniel Chitoiu said Tuesday in an exclusive interview with AFP.

A fresh accord with the International Monetary Fund, Romania's third since 2009, "will give confidence to foreign investors and international creditors," Chitoiu said on the eve of negotiations with the Washington-based organisation.

Romania, unlike many of its fellow EU states, has benefited from a dose of austerity and privatisation stemming from IMF agreements in 2009 and 2011, the minister said.

"These agreements brought numerous benefits," he added, emphasising economic stability and the restructuring of chronically debt-ridden state enterprises that had been put back on course by the reforms demanded by the fund.

In the grip of recession in 2009, Romania was given a 20 billion euro (26 billion dollar) loan from the EU and IMF on the condition the government cut public sector salaries by 25 percent and raised VAT to 24 percent.

And in 2011, an IMF line of credit worth five billion euros went untouched, even as Bucharest reduced its budget deficit, which should fall to 2.1 percent of GDP this year.

Although the amount has yet to be decided, Chitoiu doesn't believe his government will need to use it.

"What we're interested in is continuing structural reforms that limit losses and stimulate growth," he added.

Romania was looking forward to GDP growth of 2.1-2.2 percent in 2013, he said, well above the 1.6 percent projected at the beginning of the year, on the condition that the farming sector performed as expected after a poor harvest in 2012 due to drought.

Visiting Bucharest on Tuesday, International Monetary Fund chief Christine Lagarde praised Eastern Europe for its "courage" in addressing economic crises since 2008, stressing that "the worst is most likely behind" it.

First-quarter average growth in Eastern Europe was positive in the first four months of the year, with top performers Latvia growing 1.4 percent and Lithuania 1.3 percent.

By contrast, the economy of the European Union as a whole shrank by 0.1 percent.

For Romania's finance minister, the greatest spur to growth this year will be the 20 billion euros in funds pledged by the EU.

Just 15 percent of the sum has been used by Bucharest, partly because local authorities have failed to fulfil requirements that are a condition of the loan.

The minister emphasised that Romania would seek to continue its privatisation programme, which has included freight rail and energy companies.

His next focus is a 10 percent selloff of Nuclearelectrica, the company in charge of a nuclear power station in Cernavoda, in the southeast of the country.

This should be followed by the sale of a 15 percent stake in natural gas producer Romgaz.

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