Bloomberg News

IMF Approves Precautionary Payment to Romania

June 22, 2012

The International Monetary Fund approved a new stand-by payment to Romania today after the Balkan nation met targets set under a precautionary accord amid a third government change this year.

The Washington-based IMF’s board of directors unanimously approved Romania’s letter of intent and made the funds available, the Bucharest-based government said in an e-mailed statement today. The move came after the country kept the budget deficit at 0.8 percent of gross domestic product at the end of April and there was an agreement on an increase in the 2012 deficit target to accommodate some public wages increase.

The IMF said in a statement in Washington that it was making an additional amount of approximately $651.3 million available for disbursement, bringing the total resources that are currently available to Romania under the stand-by arrangement to about $3.35 billion.

Romanian authorities have indicated that they will continue to treat the arrangement as precautionary and don’t intend to draw on it, according to the IMF statement.

“The vote is a solid validation by the IMF for the government’s policy and sends an important international signal,” the Romanian government said.

IMF, EU

Romania, which secured a 5 billion-euro ($6.3 billion ) loan from the IMF and the European Union last year as a safeguard against the euro-area debt crisis, changed governments twice this year and is scheduled to hold general elections in the coming months.

Protests over public-sector wage cuts and tax increases prompted former Prime Minister Emil Boc to resign, while his successor Mihai-Razvan Ungureanu was ousted in a no-confidence vote in Parliament on April 27.

The Current Prime Minister Victor Ponta, backed by his Social-Democrats and the Liberals, won a confidence vote in Parliament on May 7 and pledged to continue the country’s international accord and meet pledges.

The IMF agreed to let Romania increase its budget-gap target to 2.2 percent of economic output from 1.9 percent, needed to support an increase in public wages by 8 percent from June and the payback of some social-contributions to pensioners.

The measure is aimed at partly restoring a 25 percent wage cut in 2010 and may be followed by another rise of 7.4 percent in December, according to Finance Minister Florin Georgescu.

To contact the reporter on this story: Andra Timu in Bucharest at atimu@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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