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February 1, 2023

IMF talks in a deadlock, deal’s suspension rumours emerge

The Fund links the next disbursement to the amendment of the consumers’ loans act. Tensed discussions over the weekend were followed last night by a new round of talks with president Basescu.

The visit of the Fund’s mission may therefore be extended and a suspension of the agreement was not completely ruled out last night, sources close to the talks on Sunday told Mediafax. In a move to unlock the negotiations on whose outcome depends the release of some EUR 900 million, president Traian Basescu called the IMF team to Cotroceni Palace last night, just a day after he met the Fund’s team headed by Jeffrey Franks. By the time Nine O’Clock went to print, no information from the discussion was available. Reacting to a possible suspension of the agreement, Adrian Vasilescu, adviser to the central bank Governor, said: ‘I am a superstitious person and I do not dare imagine such a scenario’, Gandul informs.

According to sources close to the negotiations, the IMF team is unhappy with the provisions of the consumers’ loans act (OUG 50) and apparently even asked the government to cancel it plain and simple. Both the government and ruling parties have an inflexible stance on any in-depth change of OUG 50 that would allow banks not to apply provisions to loan agreements in progress. The authorities claim it is abnormal that the IMF should come to Romania and exclusively defend banks’ position, same sources say.


Jeffrey Franks said after talks with President Traian Basescu, alongside representatives of the European Commission and World Bank, on Saturday, that the key-objective of the next agreement with Romania would be the consolidation of economic stability and structural reforms to generate bigger economic growth in the future, Realitatea.net informs. ‘We have talked to President Basescu, we have briefed him on all the discussions that we have conducted so far and on all the options that we have for moving on. We exchanged views. We discussed the objectives of the new agreement in general terms, but the more detailed talks will happen during our next visit here. (…) I believe this is something all political parties agree with – that the economic needs a faster growth and the key to a faster growth is to continue the structural reform process’, Franks said following talks with the head of state.

According to Franks the IMF team held very tough negotiations with some of the Romanian authorities, but got on quite well with the central bank representatives.

During the meeting at Cotroceni, a review was made of the policies that need to be completed on a short term, including those designed to bring about better EU funds absorption and ensure the premises for the preparation of a 2011 draft budget leading to a budget deficit of 4.4 per cent of GDP.


Franks reiterated the fact that Romania would register economic growth in 2011 and said he would share the IMF’s most recent forecast with the press today, the last day of the mission. Franks’ assertions followed an episode of criticism of the press, voiced by Traian Basescu before the talks started, when the president expressed some reserves as to various press articles speaking of an economic upturn. ‘I wonder why you find this so interesting. Why so much press here?’ the president asked the journalists and the operators present, smiling. ‘Newspaper and TV reports suggesting economic recovery in Romania are not real, the risk that the crisis may come back is very close to all of us. I have just been to the EU summit. (…) Europe is still in economic crisis. We must be cautious in the coming period, otherwise there s a risk that the economic crisis may come back in almost all countries, not just Romania’, the president emphasised. At the same time, Traian Basescu thanked the IMF delegation for its cooperation, noting his interest in completing the first agreement with the IMF and EU, with an accent falling on privatisation and reforms.


The issue of arrears was on the agenda of the informal talks held by PM Emil Boc, BNR Governor Mugur Isarescu and IMF officials Friday night. Romania will need to ask for a new waiver in connection with the arrear-related condition as the target will be missed again, Jeffrey Franks. Government sources told Mediafax that the IMF would urge the Government again to pay a significant share of its debt as a pre-requisite for the disbursement of the following loan instalment, after realising that the existing state debt had grown by another RON 1 bln only in the health sector since September, although RON 2 bln had already been paid out to health care system providers. The IMF is concerned that the money the state owes companies may be even bigger than that. Data sent by the National Tax Administration (ANAF) to Ziarul Financiar shows the state’s outstanding debt to private companies has only decreased by RON 0.5 bln in 2010, with total arrears being at RON 1.5 bln at the end of September. From 2011 onward, the state will make local authorities to include debt payment in their own budget execution and not commit new expenditures or take new loans before repaying old debts, government sources say. On the subject of arrears, the representative of Romania to the IMF, Mihai Tanasescu, has recently told HotNews.ro: ‘It will be very difficult for me to defend a waiver of the same condition for the sixth time on the IMF Board’. As for the possibility that social security subscriptions might be reduced, Franks said: ‘It is too early to comment on something that may or may not be included in the 2011 budget law”.

Jeffrey Franks, also met with PNL president Crin Antonescu on Saturday. At the beginning of the official talks, the two exchanged a few retorts on the purpose of their meeting. Franks said he was there because he wanted to collect good ideas for the new agreement from many parties, including the Liberals. Initially, Antonescu said he would attend the meeting with the IMF ‘out of minimal institutional politeness’, and denounced the attitude of the Fund’s officials towards the opposition and adding he was not interested in the discussion.


PSD Deputy Mugurel Surupaceanu has written to IMF head Dominique Strauss-Kahn, urging him to replace Jeffrey Franks as head of the IMF mission in Romania over his public statement regarding OUG 50, Money.ro informs. The Deputy explains that, through his assertions, Franks ‘put an enormous amount of pressure on the government’ who would be forced to take the place of the parliament on the matter.

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