Tuesday, April 1, 2014

Political risks to Romanian reforms on the rise ahead of elections-IMF

BUCHAREST, April 1 Tue Apr 1, 2014

(Reuters) - Romania has buffers to help it withstand potential external shocks, but domestic political pressure ahead of two elections later this year was on the rise, posing risks to the leftist government's reform drive, the IMF said on Tuesday.

The International Monetary Fund approved the first and second reviews of Romania's 4 billion euros aid deal in late March, after weeks of bickering over taxes between the government and the president threatened to derail years of deficit-cutting reforms.

"The program continues to be a policy priority for the government's leadership but risks emanating from the political arena are growing," the IMF said in a staff report for the two deal reviews, published on Tuesday.

"These factors could complicate program execution and undermine the government's resolve to implement the structural reform agenda."

The report also said the finance ministry's financing buffer, a flexible exchange rate and adequate levels of foreign exchange reserves provided cushions against potential external shocks.

Romania, the EU's second-poorest state, does not plan to draw on the funds from the deal, its third since 2009. But their availability provides reassurance for foreign investors concerned about fiscal slippage before a presidential election and a European Parliament election later this year. (Reporting by Luiza Ilie)

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