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August 13, 2022

IMF: Major problems still to tackle – healthcare, arrears and state companies

At the moment, Romania picked up pace again and the main push comes from export, president Traian Basescu says.

The continuation of the healthcare reform, the reduction of state arrears, boosting investments, including by a better absorption of European funds, and the restructuring and privatisation of state companies are the priority domains in which the Romanian state should act, according to the head of the International Monetary Fund (IMF) mission, Jeffrey Franks, quoted by Mediafax.

The latter argued the first challenge yet to be tackled is the healthcare system. “Sadly, the system is quite unhealthy. A comprehensive reform of the healthcare system is needed. In the next months, the Government will embark on a reform, as regards both revenue and expenses,” the head of the IMF evaluating mission stated.

Thus, the Finance Minister Gheorghe Ialomitianu stated, yesterday, before the Democrat Liberal Party (PDL)’s National Standing Bureau meeting, that the main targets of the pending budget rectification were funds for investments, for the creation of jobs and the payment of arrears in the healthcare system.

In turn, president Traian Basescu said, during a public statement on Sunday, after the  meeting with the joint delegation of the IMF, the EC and the WB, that for now the Government couldn’t “seriously consider” boosting the healthcare budget before expenses in this sector are kept in check, although the sector is underfinanced.

Another challenge is the elimination of arrears

“Arrears amount to over RON 20 bln at the level of state companies alone. These unpaid bills are a major hindrance to growth,” Franks added. The third priority domain is, according to the IMF, boosting public investment expenses, while remaining within the margins of the state budget.

The fourth and, probably, toughest problem is the implementation of deep reform in the state-owned companied. “Progress was made in many state companies. I would encourage the Government to act more ambitiously in this sector,” Franks further argued. He added the state should ensure, right away, transparency for all contracts concerning the state-owned electricity and gas companies.

IMF maintains forecast of 1.5 pc-growth rate for 2011, backed by exports and agriculture

Moving on to another topic, Franks stated, on the same occasion, that projections had not been significantly adjusted, as the economy gradually recovers, expecting an approx. 1.5 pc-growth rate in 2011, backed by strong exports, a good year for agriculture and the gradual recovery of demand.

“In 2012, GDP growth will continue its rising trend, up to 3.5 – 4 per cent. There is, however, a considerable risk that this growth would be affected by the international context and the poor absorption of EU funds,” Jeffrey Franks further argued. In this context, the president of the Social-Democrat Party (PSD) Victor Ponta said yesterday, after the closing of the international financial institutions’ evaluation, that “we cannot lie on our oars, thinking we’ll have a zero point something economic growth”, warning that the Romanian state will have to pay huge interests next year, Rea­litatea.net reports.

Inflation to pursue its downward trend, though will likely close 2011 above 5 pc

The inflation rate has been ebbing lately and will continue its falling trend, but it may close this year above the target set by the National Bank of Romania (BNR), of 5 pc, the head of the IMF evaluating mission, Jeffrey Franks, further stated. The Government estimates GDP will rise in Q2 by 0.3 – 0.4 per cent compared to Q1 and an inflation rate of 4.8 per cent, at the end of the year, below the BCR forecast, governmental sources stated.

Basescu: tax system reform remains priority

On the other hand, President Traian Basescu stated on Sunday that one of the government’s priorities would be revising the tax system, which would imply less, rather than more, taxes in the future Fiscal Code.

The president further argued that one possible reason for a lower deficit than the one estimated for H1 may be the failure to complete all the investments scheduled. According to president Basescu, the current account deficit’s remaining below 5 pc was seen as “an encouraging thing” during the meeting. He added that the same target was set for 2012, namely, a current account deficit below 5 pc. “At the moment, Romania picked up pace again and the main push comes from export,” Traian Basescu added.

He further underlined that an agreement was reached during this mission, namely, that the deficit target Romania commits to for 2012 “will no longer be 3 pc computed per cash, but 3 pc per ESA, which equals about 2.5 pc, 2.7 pc, par cash, depending on the results found after all the state companies are evaluated.”

Another encouraging aspect, the president argued, is Romania’s boost of credibility, following the programs applied in 2009 and, especially, in 2010 and 2011, according to studies by the experts. As regards the banking sector, president Traian Basescu stated this was judged to be well-capitalized by the IMF experts, while arguing for the need to keep a close watch of the evolution of foreign banks operating in Romania, conjoined with the evolution of parent-banks.

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