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June 25, 2021

IMF loan tranche subject to political consensus on budget

The Fund’s most important requirement is the adoption of the 2010 Budget Law before the potential talks on the Board on December 14-15.

EUR 1.5 bn for the 2010 budget. This is the number one condition the International Monetary Fund attaches to releasing the third tranche of the stand-by agreement with Romania.

‘We have had serious talks with various political party leaders, and this was part of the discussion (the discussion held at PSD’s – our note). It was a very productive and interesting meeting and we will try to continue talks with other political leaders,’ head of IMF mission to Romania Jeffrey Franks said. He stressed out that the issuers confronting Romania could not be dealt with by a single political party, but rather by a wide coalition of forces that would guarantee the fact that Romania has solutions to the current economic shortcomings.

‘If this is resolved, I would say prospects are promising for the future,’ Jeffrey Franks said. Asked if the IMF actually had the funds scheduled to be released to Romania in the first months of 2010, Franks answered: ‘It will depend on the action that needs to be taken in the meantime and we shall see in the next few days.’ According to Antena 3 TV, the Finance Ministry intends to borrow from banks the needed EUR 1.5 bln if the money from the IMF is not disbursed. The bidding should start today.

The members of the IMF delegation also met with interim PM Emil Boc at the Victoria Palace, Thursday night, to discuss the stand-by agreement with Romania. European Commission and World Bank officials also attended.

Geoana: Budget with 5.9 pc deficit should be adopted by December 10

The Fund’s most important requirement is the adoption of the 2010 Budget Law before the potential talks on the Board on December 14-15.

After his meeting with the IMF, EC and WB on Friday, PSD President Mircea Geoana stated that a legal way would have to be found for a budget containing a 5.9 per cent deficit to be adopted by December 10, when the IMF Board is due to meet, stressing that the next instalment of the loan was a national priority. Geoana added that, after the election of the future president of the country, the new government would be able to revise the budget at the beginning of 2010, keeping the same deficit target of 5.9 per cent. The PSD head further noted that, apart from the adoption of the budget by December 10 and setting the deficit target to 5.9 per cent, the Parliament would still need to adopt, by the end of the year or early the following year, the Fiscal Liability Act, the Single Pensions Law and the Single Wage Law. Geoana pointed out that the representatives of the international financial institutions had agreed to come to Romania again for talks with the new government. He said Romania needed the second instalment from the IMF before the year end, in order for the budget deficit to be more easily financed by addition resources.

Basescu: Romania has no problem to repay EUR 20 bln in five years

While in Iasi, on Saturday, President Traian Basescu said Romania had no problem to repay EUR 20 bln over five years and that a bigger loan would have been a greater burden for the public. ‘We could have borrowed EUR 100 bln, but that would have been a too heavy burden for the population in the next period. The worst thing about committing to a bigger loan would have been the inability to capitalize on the restart of economic growth sometime in the second quarter next year,’ the president said. At another meeting with the President of the Iasi County Council, Constantin Simirad, and with PDL mayors in the county, with deconcentrated authorities’ directors and with representatives of the Iasi academia, at the Iasi Prefecture, Traian Basescu repeated the idea that the Romanian economy would start growing again in the second quarter of the following year.

The head of state said the Romanian economy was not one of a locomotive type, that being the reason why his concern had been about mitigating the effects of the economic crisis the best he could.

Boc: Draft budget law ready in first ten days of November

Interim PM Emil Boc stated on Realitatea TV, Friday evening, that the 2010 draft budget law would be ready in the first ten days of November. The head of the Government said that, after completion, the Budget Law would be tabled in Parliament for approval, one option being that the members of the Cabinet, who are also MPs, sign the legislative initiative in question and overcome the difficulty of the lack of full powers of the current dismissed Government.

‘If the decision of the Constitutional Court in the matter of the 10 days of unpaid leave is passed in due time, the decision in the law which stands at the foundation of our agreement with the IMF can be enforced. If the Court rules on December 9, the measure cannot be taken. If the Court ruling is only passed on December 9, the measure cannot be enforced, but a deadline may be changed at any time, in keeping with the legal procedures,’ Boc also said. During a visit to the County of Teleorman, on Friday, the interim prime-minister reassured that the intention of the Government was not to cut wages or pensions because it had alternative solutions enabling the payment of salaries and pensions in full in the coming months, despite the adverse economic circumstances.

If elected president, Antonescu wants to re-negotiate the agreement

After the meeting the IMF representatives had with PNL officials on Thursday, Liberal President Crin Antonescu told a press conference in Alba Iulia, on Friday, that, if he was to be the new president or if PNL was to come to power, he would propose the re-negotiation of the agreement with the IMF, confessing that he did not believe the next tranche would be released. Crin Antonescu called upon President Traian Basescu and PSD President Mircea Geoana to explain what the ‘Basescu-Geoana Government’ had done with the money the IMF has paid so far. He expressed his hope that he would see what the stand-by agreement with the IMF contains when he becomes president of the country, unless ‘Mr. Pogea steals it and takes it home’ in the meantime.

Stolojan: We could pay 3 pc of GDO only for interest rates to loans

The deferring of the next tranche of the IMF loan would deprive Romania of still cheap money, stressed the MEP Theodor Stolojan for Hotnews.ro. “Think that starting next autumn the economies from the West, which pumped money also into Romania, will recover. This means that the interest rates will grow, to prevent inflation. If they rise to 10 per cent, Romania will come to pay 3 per cent of GDP at a level of the public debt of 30 per cent of GDP, only for the interest rates of the loans that it piles up,” Stolojan declared. The PDL leader also declared for Realitatea FM that the state employees and the pensioners may receive reduced salaries and pensions for a relatively short lapse of time, in the current political situation and in the context of Romania’s relations with IMF. As an answer to Stolojan’s declaration, the president of “Cartel Alfa” union, Bogdan Hossu, declared that the salaries and pensions may not decline. They may be granted in two installments at most. Hossu said that the amount of money received now by state employees and pensioners cannot decline, because this is impossible, it is illegal.

The rate will be RON 4.2-4.3/EUR in the next quarters

The national currency will not have spectacular evolutions in the next quarters against the current exchange rate, according to the representative of Romania at IMF, Mihai Tanasescu, who believed that, based on economic fundaments, the balanced parity is between RON 4.2-4.3./EUR. Tanasescu does not believe that the national currency could depreciate to a level of RON 5/EUR, if Romania does not benefit from the next tranches of the loan. The IMF official considers that it is a big mistake to make speculations about a certain exchange rate, as many businessmen do. In this context, he explained that the policy of the National Bank of Romania in connection with the exchange rate is correct, and also that of the central bank from the Euro zone.

“BNR plays this role of stabilizer, and the evolution of the exchange rate is in conformity with what is happening on the Romanian market at this moment. I don’t believe that the central bank is an instrument which intervenes frequently and which backs (the rate – editor’s note),” Tanasescu added. He pointed out that an economic scenario in which Romania would not have concluded an agreement with IMF would have exerted a very great pressure on the exchange rate.

Mihai Tanasescu, representative of Romania at IMF: If there wasn’t the campaign, the commitments with the fund were observed

Mihai Tanasescu, representative of Romania to the IMF, acknowledges that, because of the electoral campaign and of the political crisis, the fulfillment of the commitments assumed in front of the Fund was delayed. “If there wasn’t the campaign, the commitments towards the Fund were definitely observed,” Mihai Tanasescu declared in a talk-show on Pro TV. The representative of Romania at IMF, Mihai Tanasescu, believes in a short plan of measures against the crisis that can be implemented subject to the available resources and monitored “24 hours a day” in order to be fulfilled, not in lists containing tens of points and ideas. Tanasescu anticipates that Romania will register economic growth already next year, when the advance will be “timid.” “(The economic growth – editor’s note) will accelerate in 2011 and 2012. The important thing is to consolidate the structural reforms,” Tanasescu stressed. The growth of the salaries and pensions will further depend on the evolution of the economy and will be possible only in the conditions of a better discipline of the system. But the Romanians should not expect any longer the rises of 20-25 per cent from 2006 and 2007, the representative of Romania at IMF considers. The official also said that rises of salaries and pensions “will be in step” with the evolution of the Romanian economy.

Mihail Tanasescu also said on Friday that the European Commission, which has a mechanism of approval of the loans more complicate than that of the IMF, cannot fulfill all the procedures to grant Romania the second tranche of the agreement. The European Commission had to grant in December to Romania the second tranche of EUR 1 bln from the loan of EUR 5 bln established within the financial agreement with IMF and the international financial institutions, with a total value of EUR 19.5 bln. “Without the 2010 budget it is not possible to receive the tranche this year,” Mihai Tanasescu repeated referring to the IMF loan. He warned that it is out of question to not grant the following tranches from the agreement, the transfer of the funds alone will be made in December or in January. The same stressed that the meetings scheduled by the IMF mission with the leaders of the political parties will be very important for the report to the second evaluation of the stand-by agreement, but there will not be any written commitment on behalf of them. On another hand, the interim minister of economy, Adriean Videanu, declared on Thursday that IMF is allegedly entitled to request the signing of an agreement with the political parties, because “one cannot know what will be after December 6.”

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