IMF may release loan tranches, despite missed inflation target

Publish date: 22-01-2010
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The International Monetary Fund (IMF) will most likely release the next two tranches of the loan for Romania, though the country missed the inflation target set for last year, the head of the IMF mission that evaluates the stand-by accord, Jeffrey Franks announced yesterday, quoted by Mediafax.

"Now we are discussing transfer conditions for the third and fourth installments and I consider that we have very good prospects... Romania just slightly missed the inflation target" Jeffrey Franks said at the conclusion of a meeting with BNR Governor Mugur Isarescu.

On the other hand, the chief of IMF's mission does not anticipate major changes in Romania's economic growth forecast for this year, but considers possible even a decrease of this forecast. The IMF experts are still working on their analysis.

The mission has just arrived and it would be premature to make any comments now, Franks explained, adding that he does not anticipate major changes. There is always an interval around the central forecast, and economic growth could be above the estimated level, but it could also be under the 1.3 pc estimation, he added.

Speaking about economic growth, the IMF expert said the indicator will return on a positive trend, much faster and stronger, once Romania reaches macroeconomic stability. "Our role, at the IMF, is to help countries reach the macroeconomic stability and lay the ground for economic growth. Over short term, there is likely to see a small growth during the next months, but the economic advance will gain momentum toward the end of the year," Franks declared.

Asked whether he sees it possible that Romania does not need any further tranches of the loan, after the next two released by the International Monetary Fund, Franks answered it is the Romanian Government that has the final say.

"Countries decide if they want to borrow money from us, so it will be the government's decision to continue receiving tranches from the IMF, or get the money on its own," Franks said.

In his turn Finance Minister Sebastian Vladescu said yesterday evening that Romanian officials are discussion a 'revision' of the stand-by agreement. 'It is about several measures added to the existent ones. It is about a revision,' Vladescu said for Mediafax, without mentioning any details.

The last waiver: EUR 1.2 bln to reach the budget

The chief of the IMF mission for the evaluation of the accord with Romania also announced yesterday that no decision has been made yet on sending half of the next two tranches to the state budget, as this will be decided following talks in the coming days.

On the other hand, the secretary general of the Businessmen's Association of Romania (AOAR), Cristian Parvan pointed to the fact that the IMF mission did not come here to renegotiate the accord, but only to check how certain parameters are being met, 'Romania Libera' daily reports.

"The visit of the IMF delegation to Bucharest does not have the target of renegotiating the stand-by accord, its only purpose is that the experts of the institution verify how stability conditions are being met," Parvan declared. The head of the IMF evaluation mission, Jeffrey Franks (photo) however warned this is the last time that Fund's money is also directed to the state budget. His warning referred to the decision on splitting the sum of EUR 2.3 bln, provided as cumulated loan installment, between BNR and Finance Ministry, the same as it happened with the second tranche.

"In 2010, Romania could follow the example of Hungary and renounce part of the money from the IMF," believes Adrian Vasilescu, counselor of the BNR Governor, quoted by

According to economic analyst Ilie Serbanescu, "using the loan tranches to cover the budget deficit is not provided by the IMF statute. Normally, the money from the IMF should integrally reach the Central Bank. Romania benefited from a waiver, allowing it to partly use the loan to cover the budget deficit."

WB sees 0.5 pc economic growth in 2010

The World Bank (WB) kept unchanged its forecast about a 0.5 pc economic growth in Romania during 2010, but revised upwards the forecast of the Gross Domestic Product (GDP) in 2011, from 2.5 pc to 4.2 pc, the institution writes in a report quoted by Mediafax. According to the report entitled 'Global Economic Prospects 2010,' the WB expects the current account deficit to reach 4.9 pc in 2010 and 5.5 pc next year. The data have been revised from last June, when the institution estimated a current account deficit of 7.5 pc for 2010 and 8.7 pc for 2011.

In Central and Eastern Europe, WB anticipates an economic growth of 1.3 pc for this year, followed by a GDP increase by 3.5 pc in 2011. At global level, though the peak of the financial crisis has passed, economic recovery is still frail and will slow toward the end of the year, WB experts warn. There are still problems on the financial market, and demand in the private sector is still hit by high unemployment.

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