Romania could borrow more than EUR 8bn from the EC, IMFPublish date: 13-02-2009
Romania's government is in talks with the European Commission to contract a 7 billion euro loan and with the International Monetary Fund for another 1-3 billion euro loan after it made such pressures during the regular mission, people from the government told NewsIn.
Romanian authorities asked the European Commission to agree to the lending of 7 billion euros to the country, but officials in Brussels say the EC will give 6 billion euros to Romania while another 3 billion euros the most could be a loan from the IMF, the same people said.
"However, Romania finds it hard to approve the conditions imposed by IMF which would require a new raise of taxes to hike collections to the state budget," the people from the government said. The Cabinet has already cut spending with public salaries which are frozen until April when ministers will meet union representatives again to tackle future hikes considering the economic evolution.
"Also, reimbursing costs are very high," they added.
The government is carrying intense talks with the EC aiming to reduce the conditions imposed by the IMF, but discussions are difficult considering the good relations between the two bodies, the people from the Cabinet said.
Romania could call upon an external loan in the second semester, its value depending on how much the balance of payments gap will be adjusted, declared Valentin Lazea, chief economist with the central bank BNR.
Lazea warned though that to obtain such a loan, the Parliament should leave unchanged the 2009 budget bill, including the salary policy.
Once the budget is approved, Romania should focus on implementing it and on gradually relaxing the monetary policy, all towards the end of contracting a loan from an international institution, after talking the matter through with the European Commission.
The amount to be borrowed depends on how extensive the external gap adjustment will be. "It's all whether the current account deficit will be reduced orderly. We could lower it from 12.5 percent of the gross domestic product (GDP) in 2008 to 7-8 percent this year."
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