Romania completes EUR 3.5 bln stand-by agreement with IMF

Romania’s EUR 3.5 billion precautionary agreement with the IMF has been finalized, with no request from local authorities to draw under it, after the executive board of the IMF completed on Wednesday the last two reviews for Romania.

Under the agreement signed in March 2011, the international lender would free additional funds provided that Romania sticked to its reforms program, which included the reduction of arrears and the privatization of state-owned firms.

Data from the Ministry of Finance show that arrears, which include overdue wages as well as overdue payments towards suppliers, creditors and for interest, dropped from RON 838 million (EUR 188 million) in December 2011 to RON 170 million (EUR 38.1 million) by May 2013. The arrears of hospitals are treated separately.

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Authorities said the privatization of railway operator CFR Marfa and the secondary public offering (SPO) of a 15 percent stake in state-owned gas transport company Transgaz were also part of the IFM deal.

Nemat Shafik, deputy managing director and acting chair at the IMF, said: “Reform of the energy and transport sectors and of state-owned enterprises remains incomplete. The authorities have begun to gradually raise gas and electricity prices and establish a more competitive energy market while taking steps to protect vulnerable consumers. These measures are welcome, but more must be done to reform inefficient state-owned enterprises, including through greater private-sector involvement.” She added the administration and healthcare reform along with expansion of the tax base are needed to prevent the accumulation of new arrears.

The IMF director added that the economy has stabilized but the growth is weak and the downside risks are still there.

Shafik said that Romania was able to exit the EU Excessive Deficit Procedure this month, following the fiscal adjustments started in 2009. The government aims to lower the budget deficit to 2.4 percent of GDP this year, further shrinking it to 2 percent in 2014.

Ovidiu Posirca