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April 22, 2021
BUSINESS

WB to finance Romania through new two-year agreement

The agreement, whose value has not been disclosed and which involves the IMF and EC too, will be similar to the one currently in force.

Romania will receive technical assistance and financing as part of a new agreement, most likely a two-year agreement, that it will sign with the World Bank (WB), the International Monetary Fund and the European Commission, Peter Harrold, World Bank’s Country Director for Central Europe and the Baltic Countries, stated, being quoted by Mediafax.


The World Bank official pointed out that the two-year period represents the IMF’s vision, this aspect not being discussed yet with Romanian authorities.


Harrold pointed out that the new agreement with the WB will be similar to the one currently in force, with the latter’s final installment worth EUR 400 M set to be included into the new agreement that will be signed in the following months. He did not disclose the WB loan’s value, the latter set to be established in the following period.


International markets will interpret the singing of a two-year agreement with financial institutions as a sign of confidence, Harrold pointed out. “Romania is very well financed on the foreign currency side. The IMF is financing the foreign currency reserve, that is why only a precautionary agreement is needed,” Harrold said. He pointed out that other sources of financing for the budget, such as the WB, are “welcomed.”


“We will continue to play a financing role, but everyone agreed that it is time to change our outlook from the next quarter to a longer-term plan, a several years plan” the WB official added.


REFORMS IN FOUR KEY-DOMAINS


In this sense, the new programme with the WB will include reforms in four key-domains, namely social assistance, the health sector, modernizing and simplifying the taxation system, but also making state-owned companies more efficient.


“Social assistance reform is very complicated and has a high level of inefficiency. We will make sure the poor and the needy will receive the assistance they need, but without discouraging work,” Harrold explained.


In what concerns modernizing the taxation system, Harrold mentioned the large number of offices where taxes can be paid, pointing out that their number should be lowered from 300 nation-wide to just 20, following the model of other countries of this size. At the same time, he suggested that in Romania taxes should be paid once a year through an electronic system since that could bring extra budget revenues up to 20 per cent higher. Harrold also stated that the process of reform in Romania was “fairly remarkable” in the last two years, against the backdrop of a difficult political environment.


The government does not seek to privatise state-owned companies but to make them efficient and one of the reforms can be that of improving the decisional process’s quality even by “rebalancing” administrative boards, the World Bank’s Country Director for Central Europe and the Baltic Countries, added. Harrold compared the companies’ reform with the fiscal adjustment. The Economy Ministry announced that it will ask the government for a new mandate to initiate the privatization or the sale of minority shares in energy companies, continuing to estimate that it can draw in over EUR 10 bln. The Ministry received similar mandates in previous years without notable results. The Ministry has already drafted a document asking the government to give it until 2012 a special mandate in order to draw investments, administer and sale the shares of companies under its control.


Romania currently has in force a foreign loan agreement with the IMF, the EU and other international financial institutions, an agreement whose total value stands at approximately EUR 20 bln. A new IMF – EC mission will come to Bucharest on January 25 in order to evaluate the fulfillment of the goals set for the last quarter of 2010 and to hold talks on the signing of a new, preventive agreement.

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