Romania could manage without an IMF agreement, BNR governor says

IMF loan pay off keeping higher foreign exchange reserves. BNR: inflation forecast at 3.3 pc for late 2014.

The National Bank Governor Mugur Isarescu says Romania could manage without an agrement with the International Monetary Fund (IMF) and could be credible further on, as most of the amounts in the first agreement have been reimbursed.
Romania will pay off the loan from the International Monetary Fund (IMF) in 2015 and will end the process with higher foreign currency reserves than it began with, BNR Governor Mugur Isarescu declared. He mentioned that the minimum reserve requirements ratio on foreign currency denominated liabilities down from 40 percent to 18 percent.

“I think the time has come to release these figures, which justify the loan and show that the programme has worked. This entitles us to a further improvement of the country’s rating and to talk about the beginning of the new balanced and balancing development cycle, until we join the euro zone,’ Isarescu said. The loan amount was adequate, however, according to Isarescu, considering that it has been contracted during a crisis, and it contributed to dissuade those prone to speculative operations, thus helping Romania to overcome that difficult economic period.
He mentioned that Romania will still have to reimburse approximately USD 1.3 billion of the IMF loan at the end of this year, with payoff scheduled in 2015. According to Isarescu, the reimbursement of Romania’s loans from the EU and the World Bank is to start this year, continue at a higher pace in 2015, and smaller amounts will be due in 2019, when Romania should join the euro zone if this goal is still pursued.
In a different context, the review visit to Romania by an IMF delegation which was initially supposed to take place this April was postponed until after the European elections, and this applies to the entire Europe, Premier Victor Ponta said yesterday.
The inflation for this year is forecast to be slightly under that reported at the end of last year by 0.2 per cent to 3.3 per cent, announced governor of the National Bank of Romania Mugur Isarescu during a press conference, on occasion of presenting the quarterly report of inflation. The inflation was set at 1 per cent for the first quarter. “The prices for vegetables and fruit dropped. There are no major adjustments at fuel. I would say they remained with negative values compared to 2013,” said BNR governor Mugur Isarescu.
Among the potential causes that might lead to adjusting inflation from the projected values are the volatility of capital flows for emergent economies, in the context of the geopolitical and regional evolutions, of the continuation of the trans-border financial disintermediation and the possible adjustments of the monetary evolutions by the major central banks.
“You should not think that BNR wants to appreciate the exchange rate, or at least I do not. I am not sure we have such solid ground and that export produces so much,” added Isarescu. The evolution of the economy of the Euro Area and the prospects of evolution for the major emergent economies might influence inflation as well.
NPLs ratio 17 pc under EBA, 22.3 pc using domestic methodology
The non-performing loans (NPL) ratio calculated using the methodology of the European Banking Authority (EBA) stands at 17 percent, while under the Romanian methodology the figure is 22.3 percent, Governor Mugur Isarescu also announced. He explained that NPLs ratio was calculated so far as the ratio of NPLs to the total non-government credit. According to EBA, the ratio is calculated as NPLs to total credit (government and non-government). According to the Governor, Romania used the more severe indicators to calculate the NPLs ratio, among other reasons, to avoid repeating the 1997-1998 episode when non-performing loans were hidden.

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