BUSINESS

Gov’t could ask IMF for third derogation from budget arrears target

The Fund’s evaluation mission to Romania started yesterday.

During talks occasioned by the fourth evaluation of the stand-by agreement, the government will ask the IMF for a new derogation from the arrears that the state has to pay, Mediafax reported quoting government sources. “Q1 indicators agreed with the IMF were attained, with the exception of the level of budget arrears, namely the sums that the state has to pay and whose payment deadline was surpassed by 90 days. There will probably be a new derogation from the Fund provided we prove that we have made progress in this regard,” the quoted sources said.


The general consolidated budget’s arrears climbed to RON 1.5 bln in December 2009 from RON 1.08 bln in 2008 and have to be lowered to RON 480 M by the end of the year. The timetable negotiated with the IMF in February consisted of reducing arrears to RON 1.27 bln by the end of March, to RON 1.09 bln by mid-2010, to RON 810 M after the first nine months and to RON 480 M by the end of the year. Since the start of the programme, the government asked for derogations from those targets during each evaluation, failing to fall within the quarterly values it had committed itself to observing. Budget arrears have to be completely eliminated by the end of April 2011 when the programme with the IMF is scheduled to end. Another subject to be discussed consists of the lump-sum tax. In the first round of talks, IMF experts touched on the situation of budget revenues in Q1, revenues that were smaller than estimated. Authorities were planning to introduce the lump-sum tax in 2010 in order to replace the minimum tax introduced in May 2009.


The first members of the IMF delegation of experts have already arrived in Romania while Jeffrey Franks, head of the evaluation mission, will arrive in Bucharest today. The fourth evaluation mission will end on May 7. The IMF board will discuss the evaluation report in the second half of June and will decide whether to release the fifth tranche worth EUR 850 M. Romania has a two-year loan agreement with the IMF for EUR 12.95 bln, with the total external loan package from the Fund, the European Union, the World Bank and the EBRD set to top EUR 19.95 bln. Fin Min Sebastian Vladescu said yesterday that he is cautious when considering the IMF prognosis on Romania’s economic growth for 2010 of 0.8 per cent of GDP, although it was reduced from 1.3 per cent. Vladescu said the prognosis might be too optimistic. ‘I hope IMF’s prognosis is not too optimistic,’ he said. On the other hand, PM Emil Boc said, during a TV talk-show on Monday evening that Romania would have registered a 17 per cent budget deficit if his government did not take supportive measures to cut expenditures.

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