Analysts: Gov’t must close the accord with the IMF the best possible way

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Officials in Washington or Brussels will have to decide which of the “so many countries” that need support will be granted priority, former Finance Minister Daniel Daianu believes.

The government is recommended by analysts to make efforts in order to close the current accord with the international institutions in the best conditions, regardless if it will later succeed to negotiate a new arrangement, which seems increasingly hard to conclude, mainly because the IMF and EC have other countries on their priority list, Mediafax reports.According to analysts, Romania is far behind schedule in adopting the reforms agreed with the International Monetary Fund (IMF) and European Commission (EC), so in any scenario it must first regain the time it lost and try to complete the ongoing accord by meeting most criteria, which would also allow a more relaxed negotiation space in the eventuality of a new arrangement. “This accord was a disaster. We did nothing of what we said; on the contrary, we even reversed some good decisions in 2012, but what the IMF promised when it come with this accord did not happen either. The economy did not recover and it is even collapsing. Romania must repay the money with an interest and I am not sure it can do it, in these conditions,” economic analyst Florin Catu said. He added that the only positive scenario is to conclude the accord in the initial conditions and to finalise it, which means that the IMF must press for this to happen. “After that moment, if we want to be a competitive economy, we must adopt a clear and transparent strategy on the accession to the euro zone,” he mentioned.The condition of concluding the current agreement in the best possible terms is essential for the chief economist of Raiffeisen Bank, Ionut Dumitru too, who stresses that the current programme – as it has been conceived – represents a failure so far. “We must demonstrate, at the last moment that we are firmly committed to fulfilling the obligations of the current accord, which is much behind schedule. A possible solution could be pushing back the deadlines for the obligations provided by the current agreement,” Dumitru commented.Although he considers that we need a different kind of agreement with IMF, EC and the World Bank, economy professor Daniel Daianu, also a former minister of Finance, agrees that Romania must first fulfil most of the commitments assumed within the present accord, which will increase its credibility abroad and will improve its position in the negotiations for a new type of agreement. “I still believe that the benefits of a new accord would outweigh a loss of image in the sense that Romania still needs external constraints. (…) Another scenario is about not reaching a new agreement because it was not possible. There are several prospects: very high competition over the IMF and EU funds, the fact that Romania is in a relatively better situation than other countries,” Daianu explained.The former Minister of Finance believes that the officials of Washington or Brussels will have to decide which of the “so many countries” that need support will be granted priority, and the analysis will take into account the fact that Romania has completed a part of the adjustment, which refers to the budget.“Maybe there is also the variant of rolling by not closing in time. But a new accord anyway means also rolling some conditions, because we are running out of time and delays are significant,” Daianu added.Analysts’ opinion converge towards the position voiced by BNR Governor Mugur Isarescu, who said Monday that Romania must close the current accord in a positive way, which will offer a good cooperation framework during the whole year 2013.

Dumitru, Raiffeisen: Romania might not be a priority for a new accord

In his turn, the chief economist of Raiffeisen Bank warned that the officials of the European Commission hinted on several occasions that they will direct the financial support towards countries with bigger problems, so Romania might not be considered a priority with this respect, especially as it avails of big sums from structural and cohesion funds, where performance is very low.Adding to this opinion, Daianu said that one should rule out the idea of an exclusive accord with the IMF, as there already exists a traditional relation with the Fund in relation with Article IV. “There could be some lines, similarly to Poland, and a line that would reward the good performance of the economy, but this would bring us on very speculative grounds,” Daianu mentioned.In the scenario of a failure to close a new agreement that would provide the external support necessary to continuing the reforms, along with credibility on foreign financial markets, Daianu reminds that the acting Executive would have the chance to press on with reforms without international partners, given the very strong support it enjoys in Parliament and among population, without being concerned about erosion. A more pessimistic opinion about the chances for a new agreement with the IMF and EC was expressed by Florin Citu, who believes that the next important anchor for Romania should be the accession to the euro zone, because this process represents in itself a constraint for the economy and a pressure for making reforms. “This objective must be adopted by all political parties, with a clearly set date and steps to be made, along with the fiscal compact,” Citu explained.