If political crisis continues and the completion of the second evaluation by the International Monetary Fund (IMF) gets pushed back to January, the Fund might deliver the third and fourth installments together. Anyway, the next IMF evaluation was scheduled for late January – early February 2010, and the fourth tranches was due for March, the IMF representative for Romania and Bulgaria, Tonny Lybek yesterday told a press conference organized by the European Commission’s representation office and the European Institute of Romania, on the means to overcome the economic crisis. According to the IMF official, delaying the third installment because the political crisis is not solved yet has additional costs. The IMF money comes at a 3.5 pc interest, while the bonds issued on the local market had an interest of 5.25 pc, Lybek explained. If the Government takes loans in RON, it will pay an even higher interest, so there are additional costs, he went on explaining. For Romania, the biggest challenge is to curb fiscal deficit under 3 pc, said Lybek, who estimates the Romanian economy will grow between 0 and 1 pc next year.
“We must see the specific details and decide whether the budget plan is feasible. It is not enough to formulate a budget plan relying on a gap of 5.9% of Gross Domestic Product. Expenses structure must also be in line with our macroeconomic forecasts”, Lybek said. He added that passing the 2010 budget was a “priority” for Romania to receive the third tranche from the IMF and stressed the importance of its credibility. “It must be approved by the Parliament as well”.
Asked whether the IMF would release the third tranche of the loan, if Romania had a budget for 2010 but no stable government, Lybek said “the IMF is not getting involved in politics.”
On the other hand, BNR chief-economist Valentin Lazea described next year’s budget deficit target of just 5.9 pc of the GDP as “a modest goal,” adding that the deficit must be brought under 3 pc of the GDP by the year 2012. The health of Romania’s financial sector “critically depends” on the reforms in the two sectors, which has been strongly demanded by both IMF and WB.
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