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January 26, 2022

EUR 750 M from WB for health system and social reforms

The financial institution gave assurances that the economic forecasts will not be changed after the WB, IMF and EC mission to Romania ends.

The World Bank (WB) will give Romania EUR 750 M for two health system and social assistance projects, seeking to back new reforms in these two sectors. Sudharshan Canagarajah, the World Bank’s lead economist in charge of economic policy matters in Europe and Central Asia, stated yesterday in Bucharest that the ongoing loan agreement will be finalized, meaning that the third EUR 400 M installment for development policies will be wired, Mediafax informs. He pointed out that the World Bank is discussing with the government the implementation of two other projects as an extension to this loan agreement. Catalin Pauna, chief economist of the World Bank’s bureau in Romania, pointed out in his turn that the two projects are being prepared, that they will concern the social assistance and health sectors and will span several years. Canagarajah pointed out that EUR 500 M will be earmarked for social assistance and EUR 250 M for health.

“I believe that at this stage we should say that these are general figures. In what concerns the moment when they will be offered, I don’t believe we will know since these funds are conditioned by some reforms, there are preconditions,” Canagarajah stated. He stated that the projects’ reference points, the ones on the basis of which the wiring of the funds will depend, will be agreed with the government.
“When the conditions are met then we will wire the money so that the targets will be set throughout the more than three years, which is normal for the World Bank. If you’re not capable of meeting these conditions then the timetable can be changed,” Canagarajah explained.

At the same time, Pauna pointed out that these projects are a different instrument compared to the ongoing development policy loans. “The sums will enter the budget deficit but they will come in return for applying these measures in time. We will accomplish deeper reforms with these instruments. Development policy loans focus on the main policies necessary in order to solve certain problems in a given period and in a certain sector, but if you want deeper results then you need such instruments,” Pauna said.

The World Bank’s leading economist pointed out that the economic growth estimate for 2011 will not be modified after the International Monetary Fund, European Commission and World Bank mission to Romania ends on February 8. Official estimates point to a growth of 1.5 per cent in 2011.

The loan package totaling EUR 20 bln includes three development policy loans totaling EUR 1 bln from the World Bank, loans attached to a package of public sector reforms, including reforms in the education and health sectors, in the social protection and financial sectors. In October 2009 Romania received the first installment (EUR 300 M) of the development policy loan that as a 14-year term and a grace period of 13 and a half years. At the same time, at the end of January the World Bank approved the second installment (EUR 300 M) that was initially scheduled for the first part of 2010 but that was postponed several times because the measures agreed as a precondition were not applied.


The World Bank representatives also announced that the financial institution will conduct eight surveys on sectoral policies, namely on economic growth, “agricultural competitiveness,” “business environment and industry,” “productivity, innovation and export competitiveness,” labor market, fiscal sustainability, FDI and structural funds for infrastructure. Catalin Pauna, chief economist of the World Bank’s bureau in Romania, pointed out that a set of grades will be available towards the end of April. Canagarajah showed that the World Bank is trying, along with the government and independent third parties, to find out what are the constraints for the economy and to return to economic growth. “In a way the Romanian economy is in a very difficult situation because not only does it have to recover from the global crisis, but it is also entering a new stage in its European Union integration,” Canagarajah stated. He underlined that it is important to understand the factors that will support the growth of Romania’s agriculture against the backdrop in which global food prices will become extremely important. In his turn, World Bank’s lead economist in charge of economic policy matters in Europe and Central Asia pointed out that no economy will grow without hiking direct investments and the World Bank wants to make sure it solves the existing constraints that Romania’s economy shows when it comes to foreign investments.

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