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December 6, 2022

Reforms, no progress, economy not recovered

IMF conclusions after the 7th , 8th evaluations. The agreement with the IMF will expire and there will be no other accord if Romanian authorities do not fulfill the preconditions assumed in June, Erik de Vrijer, head of the IMF mission, warned.

The International Monetary Fund (IMF) estimates that Romania had zero economic growth in 2012, following a GDP growth of 2.2 per cent in 2011, and expects a relatively modest growth of around 1.5 per cent this year, Erik de Vrijer, head of the IMF evaluation mission, stated during a press conference in which the conclusions of the 7th and 8th evaluations that started on January 15 and ended yesterday were presented. “The growth is relatively weak, partly because after a financial crisis the recovery takes time, partly because of the external environment, then because of the weather in 2012, but, likewise, because the implementation of reforms and the absorption of funds was not as fast as we planned,” Vrijer stated. The government estimates that Romania had an economic growth of 0.2 per cent in 2012, and this year’s budget is based on a real GDP growth of 1.6 per cent year-on-year. The agreement with Romania cannot be considered derailed for now because the government took the commitment to adopt corrective measures in order to reach the goals set in the program and seems serious to apply what it promised, Erik de Vrijer stated. The head of the IMF’s evaluation mission added that the government asked for a three-month delay, which means that these evaluations will be finalized at the end of June through a vote within the IMF’s Executive Board. “Since you missed several indicative targets the money that were available after the sixth evaluation can no longer be drawn, although this is a precautionary programme, until all three derogations are approved by the IMF Board, meaning in June,” Vrijer added. In other words, Romania will not have the IMF money at its disposal until the institution’s board approves the 7th and 8th evaluations. De Vrijer explained that if Romania does not fulfill by June the preconditions assumed then the agreement will expire and there will no longer be any kind of agreement between the IMF and Romania. According to the head of the IMF delegation, Romanian authorities missed the targets concerning the cash budget deficit, the state budget and the local authorities’ arrears and the National Bank of Romania’s (BNR) net foreign assets. He nevertheless underlined that Romania fulfilled the most important target, namely that concerning the budget deficit calculated on the basis of the European methodology, the estimates pointing out that in 2012 the ESA deficit fell below 3 per cent of GDP. The ESA deficit data come with a delay and the IMF programme relies on the cash deficit that takes into account only the inflows and outflows, without the payment commitments. According to Vrijer, the cash deficit target was missed because of European fund reimbursements in 2012. This problem was solved in mid-December 2012 but the sums did not enter in December and will enter in February-March 2013. “We look on the failure to reach the cash budget deficit target not as a failure per se because of an erroneous fiscal policy, but because of some delays in the receipt of some sums,” the IMF official explained. He pointed out that at there were several failures in reaching some targets at the end of last year and delays in structural reforms. The IMF estimates a drop in the inflation rate in the second half of the year, the inflation rate set to stand around 3.5 per cent. De Vrijer pointed out that important progress was registered when it comes to lowering the financial imbalances and stated that the 2013 budget is a balanced one.

The co-financing of projects with EU funds returns to 15 pc as of March

The co-financing of projects with EU funds will return from 5 pc to 15 pc starting the end of March, when the accord with the European Commission ends and EC will not formally extend it until June, as the IMF has accepted, the head of the mission announced. During the accord with the EC, Romania enjoyed a derogation obtained by the former government, which allowed that public projects financed from EU funds are co-financed only in a 5 pc proportion, instead of 15 pc, as it is usual. The real absorption rate of structural and cohesion funds, compared to the payments made by the European Commission, was 11.47 pc (EUR 2.204 bln) at the end of December 2012.

Energy and transport sectors can be strengthened in Romania

There are two sectors in Romania where activity can be strengthened, respectively energy and transport, the head of the IMF mission to Romania, Erik de Vrijer said.“Energy due to the fact that Romania has significant energy resources that could be exploited. Transport, because Romania has a very favourable geographic position between the Black Sea and the rest of Europe and, if one has a good transport infrastructure, then one can attract more investment, manufacturing activity both from Romania and abroad, in order to develop the economy. In both sectors there are many state companies and we discussed with the government about how the performance of state companies can be improved. For example, the companies of the railroad sector, Hidroelectrica a.s.o. There practically are two main roads. First one must make sure that there are professional, capable managers in these companies, who can efficiently administer them so these companies make profit and are able to invest, to contribute to the budget, in order to better finance health services and education,” Vrijer explained. According to the IMF official, distributing companies from the electricity and gas sectors will not make major investments if the National Regulatory Authority for Energy (ANRE) does not recognise their costs. As for the fiscal sector, the IMF does not consider as opportune a decrease of the VAT for bread and pastry products and does not see the advantages of such an approach.

Co-payment, a good idea

“The IMF is no expert in the medical system, but enforcing the co-payment system is a good idea for changing the type of service provider – hospitals, policlinics, dispensaries. The medical system is expensive and the consumers, the patients must have alternatives. I did not get into details regarding the RON 10 co-payment, if this is for a day, or for the entire time spent in hospital. I think it is per day, at least this is what I understood. If the co-payment is very small, the measure will fail,” Erik de Vrijer said. The IMF official added that the Romanian medical sector needs two steps in the reform: first, reducing the waste of resources, and second allocating more resources.According to the Ministry of Health, the co-payment will not be charged for emergency services, specialised ambulatory, family medicine or medical analyses, and for the categories exempted by law – children, pregnant women, retirees with pensions under RON 700/month, the patients included in national health programmes, if they do not have job incomes, war veterans. The Romanian Coalition of Organisations of Patients with Chronic Illnesses (COPAC) does not agree the government’s intention to enforce the co-payment system in the medical sector, saying that it is against the Law of Health and affects low-income patients. Moreover, according to COPAC, chronic patients must be admitted to hospital several times a year, which means that they will pay large sums as co-payment.


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