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September 28, 2021

Governor Isarescu: New agreement with IMF has to be centred on reforms

A new agreement with the IMF will give added credibility to Romania’s economic policies, but will have to be centred on structural reforms, not on the problems of the balance of payments, and the way in which the former agreement was finalized will also tip the scales in the taking of a decision, National Bank of Romania (BNR) Governor Mugur Isarescu stated.

“An agreement with the IMF would give added credibility to Romania’s economic policies, would also help us in what concerns advantageous financing on international markets and would probably stimulate reform processes too. But all of this has to be decided in a proper framework and in perspective, because there are elections next year and it (an agreement – editor’s note) will concern not only next year but also the Government to come after the elections,” Mugur Isarescu explained on Wednesday at the conference in which the decisions taken by BNR’s Board of Directors were presented.

In his opinion, bearing in mind that the budget deficit is very small, being mostly financed through capital inflows, the financing needs can be controlled and, consequently, the new agreement should not be centred on the problems of the balance of payments but on the problems left unsolved, such as structural reforms.
“In taking the decision I believe the manner in which the former agreement was finalized will also tip the scales fairly significantly,” the BNR Governor added.

Adopting euro in 2019 no longer feasible

The target set for Romania to adopt the European single currency, namely the year 2019 is no longer feasible, and the National Bank of Romania (BNR, the central bank) will ask the Government and the Presidency that, before announcing a new date for entering the Eurozone, to set up a road map to be accepted through national consensus, BNR Governor Mugur Isarescu said on Wednesday.

‘The 2019 target is not feasible anymore, not only because time has passed, but because we should have joined the ERM [Exchange Rate Mechanism] II on January 1 2016, or June 1 2016 at the latest. The preparation for this antechamber is complicated,’ the BNR governor explained.

In his opinion, this is not possible anymore, not even technically, and even if Romania would join the ERM II by the next year’s half, there is another problem.

‘The two-year period a country should stay in this antechamber of the euro is the minimum. So, no one guarantees that we join the Eurozone in 2019 and I don’t believe this is the moment to push it,’ added Isarescu.

In this context, the BNR head warned that a road map is essential before announcing a new target.

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