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February 4, 2023

IMF delegation concludes mission, structural reforms expected

According to the letter of intent agreed upon by Government with the Fund, medical co-pay system is going to be introduced in March and the privatisation of state-owned companies will continue at fast speed.

PM Victor Ponta had the last meeting with the delegation of the International Monetary Fund (IMF), European Commission (EC) and World Bank (WB). The representatives of the three international institutions are going to present today the conclusions of the 7th and 8th review of the stand-by agreement. After the meeting on Monday, the PM said the IMF visit was concluding with concrete results, including an agreement on the final version of the 2013 state budget the most difficult topic of the talks being the privatisation of CFR Marfa. ‘We practically have an agreement on the budget with our international partners and I hope (…) the Parliament gives the final vote,’ Ponta told a press conference at Victoria Palace. He said the Executive had asked for a two-month extension of the structural reform programme ‘so that we are able to present more progress with the procedures for the privatisation of state-owned enterprises on the IMF Board meeting’  and that the Fund had agreed to the request in principle. ‘I want to specify that the agreement with the European Commission ends on March 31. We asked for an extension of the talks on the IMF Board until July when the Government plans to ask the EC and then the IMF to negotiate a new precautionary agreement. The IMF’s agreement in principle is good news,’ the prime minister also noted. According to Ponta, the new agreement would not necessarily entail a loan, but would mean that Romania ‘sticks to a programme of budget discipline and structural reforms all European countries need’.

Co-pay – modest fixed charge according to services provided

The patient will pay as of March this year a small sum (co-pay) for hospital services, except emergency services, under the letter of intent agreed on by the Government and the IMF, obtained by Mediafax. ‘In order to deal with the financial imbalances impairing healthcare sector we are determined to implement the following measures: in March 2013 we will introduce the co-pay system which means that patients will be charged a small fixed sum for services provided by hospitals, except emergency services; we will continue to revise the list of subsidised drugs and will introduce mechanisms to reduce hospitalisation periods and encourage the use of outpatient services,’ the document reads. Health Minister Eugen Nicolaescu said yesterday the co-payment would be implemented at a ‘modest value’ and will be paid on discharge. The official would not say how big the charge would be, but noted instead that the effectiveness of the system would be assessed at the end of 2013 and a decision would be made on whether to keep it or not. Premier Victor Ponta however said the hospital discharge co-pay would not exceed RON 10 and it would not be charged for emergency medical care or medical tests. Hospital managers’ contracts will be amended so that managers may be replaced following quarterly evaluations if the hospital has debt going back three consecutive months. The document also shows that, in order to avoid debt building up in the healthcare system, the Government would transfer financial resources from hospitals with limited competence to establishments included in the network of regional emergency hospitals. The centralised drug procurement system will also be evaluated at the end of 2013.

CFR Marfa privatisation agreement to be signed before the summer

In its talks with the IMF, the Government made the commitment to publish the CFR Marfa privatisation notice in March this year and sign the agreement on the sale of a majority stock by mid-May, with the transaction to be concluded when ‘all conditions are fulfilled’. ‘To CFR Marfa, preparations are advanced for the sale of a majority stock to strategic investors. We will hold a public auction for the selection of the winner and we intend to close the deal as soon as all conditions laid down in the privatisation agreement are fulfilled,’ reads the letter of intent agreed on with the IMF. Under the precautionary agreement currently in progress, the Government is supposed to sell its stocks in strategic companies in the energy and transport sectors, including Transgaz (15%), Romgaz (10%), Hidroelectrica (10%), Nuclearelectrica (10%), Oltchim (total privatisation), CFR Marfa (privatisation of a majority stock), Tarom (20%). The Government will also carry on with the privatisation of Electrica SA. ‘Before the meeting of the IMF Board we can only go at fast speed with the structural reforms assumed by the Governments of Romania. The listing of stocks should allow not just the presence of private capital, but also the use of sums obtained on investment,’ Ponta also said. He noted the privatisation of the majority stock in CFR Marfa would be done with a strategic investor, meaning a company with expertise in the field and with financial capabilities.

Oltchim insolvency – significant reduction in activity

In what concerns Oltchim, the plant’s trustee in bankruptcy will present in mid-April, when the measures set to be adopted will be established, a report on the company’s situation. “The insolvency will have as a result a significant reduction in the company’s activity,” the document reads. Oltchim’s restructuring plan will be presented six months after the rescue aid measure proposed for the plant is approved, the first tranche having a value of EUR 20 M, representing the credit for current needs, according to the information posted by Economy Minister Varujan Vosganian on his personal blog. “The government has to continue the procedure to privatize the Oltchim plant with a strategic investor. (…) It’s obvious that nobody will come to take over CFR Freight’s and Oltchim’s debts,” Premier Victor Ponta stated on Monday after his meeting with the IMF delegation. The same letter of intent reveals the fact that, until mid-June, the National Post Company (CNPR) will be privatized through capital increase, the tender announcement set to be published until the end of February, on condition the procedure is approved by the European Commission. A list of eligible investors will be established by the start of April, by applying pre-eligibility criteria. The government will select the eligible investors by mid-May and the privatization contract will be signed by mid-June 2013.


Privatization measures criticized

Representatives of the IMF delegation held talks with the representatives of the Parliament’s joint budget-finances commissions too. Liberal Dan Radu Rusanu, Chairman of the Lower Chamber’s Budget Commission, harshly criticized the IMF for the privatization measures proposed and for the way in which the previous agreement ran. “We’ve done privatizations before, privatizations under the influence, let’s not call it pressure, of international financial institutions, privatizations which show that they were not at all advantageous. Although it is known that the state is the worst administrator, we conducted privatizations, but the investments promised were not made. (…) In the natural gas sector for example, where we have Gaz de France and E.ON Gaz, the investments promised were not made. The services are as bad as they were before, when they were state-owned, because these companies sacrificed investments and the quality of services for profit, and they obtained double-digit profits. (…) We replaced a state monopoly with a private one. (…) As an irony, this monopoly belongs to companies that have state capital, Gaz de France, E.ON…,” Dan Radu Rusanu stated at the start of the talks with the IMF delegation. In reply, head of the IMF mission Erik de Vrijer (photo R), stated that the accusations are groundless and asked the press to leave the room. The PNL Vice President also stated that the budget limitations imposed by the international financial institutions for this year are not meant to restore Romania’s economic growth, stating that the adjustment of the deficit compared to 2012 is far too high for the current economic conditions.



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