Romania to take several loans from international institutions, central bank governor says

Publish date: 27-02-2009
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Romania could contract several interconditioned loans from the European Union (EU), International Monetary Fund (IMF), World Bank (WB) or the European Bank for Reconstruction and Development (EBRD), possibly on one or two years, said today the country's central lender (BNR) governor Mugur Isarescu.

The governor declared the loan could be contracted on one or two years and could exceed Romania's needs, taken into account the financing gap in the private sector.

The capital inflows Romania had been counting on for years diminished worldwide. In Romania's case, if it did not diminish, it most certainly won't go up anyway, as there are still payments pending. The negative capital flows could sent our country to a zone with below zero economic growth, Isarescu explained.

The governor stressed that there won't be one single loan, but several financing sources, including the WB. He mentioned also financing for projects from institutions like the EBRD and a potential special financing to protect reserves, under the form of a foreign exchange swap from the IMF.

The central lender head said such a loan would grant Romania the possibility to increase the foreign exchange reserves without money issuance, which would put pressure on inflation.

Isarescu also stressed the importance of drawing in European money, considering that the available structural funds amount to 6 - 7 billion euros. However, he warned that Romania's capacity to manage these funds needs to be improved.

The governor said Romania has not yet sent a letter of intent to request an external loan as the central lender is still in talks with the government.

A potential loan from the International Monetary Fund (IMF) would be contracted to protect the foreign currency reserves and not to finance the economy, said Isarescu earlier this week. The governor refused to give any sums for the potential loans from each institution, but stressed the amounts recently rumored are exaggerated. The head of the central bank declared the country's need to finance the public debt to support the private sector stands between 2 and 4 billion euros.


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