Letter for IMF loan to be sent in two days

Romania is to sign the letter of intent for a financing agreement with the European Union (EU) and the International Monetary Fund (IMF) in a couple of days.

Based on this letter the authorities hope to be granted a loan worth €20 million, of which €13 million will come to the Treasury from the IMF, €1 bln will be obtained from the World Bank, to be used for investment projects, while a further €1 bln will be borrowed from the European Bank for Reconstruction and Development (EBRD), according to the First Vice President of the ruling Liberal Democratic Party (PD-L), Theodor Stolojan, for Business Standard. On Sunday, the European Commissioner for Economic and Monetary Affairs, Joaquin Almunia, said that an agreement between the EU, IMF and Romania could be made public this week.

Romania's Representative to the IMF, Mihai Tanasescu, told Business Standard that talks between Romanian officials and international experts are to be finalized tomorrow. After that, the Romanian state is to send the official letter of intent for the loan. A draft letter is to be analyzed by the two governing parties - PD-L and the Social Democrats (PSD), Tanasescu said. He added that the IMF is not to impose tax hikes or salary cuts, but rather insists on a significant reduction in public spending. Stolojan added that the Finance Ministry will redraft this year's budget after reaching the agreement with the EU and IMF, which is to be calculated based on a budget deficit below 4.7 percent and economic decline under 4 percent.

Meanwhile, PSD President Mircea Geoana said that Romania is to borrow some €13 billion from the IMF and that the funds will be used to stabilize the exchange rate. Furthermore, some €5 bln will be obtained from the European Union to finance the budget deficit and budget investments.

President Traian Basescu, who was on an official visit to Austria yesterday, said that Romania is not discussing aid with the IMF, but rather a two-year agreement, which "includes nothing that could worry us in terms of how it is drafted." He added that the country "is not applying for a loan because it is in a situation that requires a bailout.

Romania is taking preventive measures because we foresee a worsening of the economic situation globally, especially Europe, and we realize that we could not be a very good partner to banks from which we require a certain behavior on the Romanian market if we do not create a resource to free up lender funds from several areas to which they are committed," he said. Basescu was talking about reserves kept at the National Bank of Romania (BNR) or money attracted by the Finance Ministry.

"So we preferred to apply this safety net to Romania's economy, in order to make banking operations more autonomous in relation to the state budget," he explained. Some of the top banks operating in Romania are Austrian lenders. During a February visit to Bucharest, Austrian Finance Minister Josef Proell encouraged the Romanian state to take out a loan from either the IMF or the EU, and use funds mainly to support the banking system rather than for the financing of the country's budget deficit.

Business Standard