Sept. 29 (Bloomberg) -- The International Monetary Fund agreed to unlock $675 million in funds from Romania’s crisis- prevention loan after the government trimmed its budget deficit and sought to sell state assets.
The funds can be tapped under the eastern European nation’s 5 billion-euro ($6.8 billion) precautionary arrangement with the Washington-based lender and the European Union, aimed at providing a safety net during the euro-area debt crisis. This is the third installment of the program, following a 480 million- euro tranche made available in August.
“Romania has made good progress under the new Stand-by arrangement,” the fund said in a statement. “The authorities’ commitment to continued reform has helped restore market confidence and economic stability.”
Romania, which counted on an IMF-led bailout from 2009 through early 2011 as its economy shrank, exited recession this year, with gross domestic product expanding 1.7 percent from a year earlier in the first quarter and 1.4 percent in the second. It doesn’t plan to draw the precautionary funds as it has sufficient reserves. The IMF will store the available installments in Washington for emergency withdrawal.
Romania has pledged to narrow its budget deficit to 4.4 percent of GDP this year from 6.5 percent in 2010 and sell stakes in energy and transport companies including utilities Transelectrica SA and Transgaz SA to raise revenue.
The government has cut public wages, frozen pensions and increased tax revenue, helping it meet a first-half budget- deficit target set by its lenders. The January-June shortfall was 11.3 billion lei ($3.6 billion), or 2.1 percent of GDP, below the 18.1 billion-lei gap in the year-earlier period and within its 12.6 billion-lei goal.
The deficit, which the government plans to reduce to within 3 percent in 2012, was 2.4 percent at the end of August, the Finance Ministry said Sept. 26.
Romania is seeking to finance the shortfall through domestic and international debt markets and is still trying to sell energy assets this year and next after failing to find a buyer for a minority stake in OMV Petrom SA, the country’s biggest oil company, in July.
--Editors: Andrew Langley, Christopher Wellisz
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