Up to 1 bln eur. agreement with World Bank requires IMF ok

Romania's government is currently negotiating a loan worth up to €1 billion with the World Bank (WB). The funds could help finance the budget deficit, but only if the government commits to a public sector reform package, according to the World Bank's Chief Economist, Catalin Pauna, for Business Standard.

President Traian Basescu yesterday met with a World Bank mission. Furthermore, the WB is to release today a report on the economic and financial crisis impact on new European Union (EU) members, including Romania.

This is the first concrete step Romania has made to obtain a foreign loan. Analysts and authorities have often discussed possible financing from the EU or the International Monetary Fund (IMF), but no official application was filed to date, the institutions said.

Pauna said that WB only lends funds based on a letter of guarantee from the IMF regarding a country's macroeconomic situation. "Discussions on reforms are held between the IMF, the World Bank and the concerned government. Such a program is promoted only in case of certainty that a country's macroeconomic framework is stable. The goal of such a loan is not to finance unsustainable deficits, but to correct the causes of possible imbalances," he said.

Speaking about an agreement with the IMF, which some local authorities are reluctant about, Pauna said that markets see this as a positive step. However, it is up to the government to decide whether Romania needs such an agreement or not. "If we look at other countries, an agreement with the fund was seen as positive by the markets and access to financing has improved. We can assume that this will also be the impact of a possible agreement between Romania and the fund," he said

Business Standard