Former ministers advise Boc on IMF negotiations

Daily, ministers, experts of the Ministry of Finance, and the National Bank of Romania are holding meetings with representatives of the international organizations, who are trying to figure out how the economy stands, what are its financing needs, and what measures are needed to ensure stability. Public spending is under scrutiny, while economic growth and the budget deficit are the main indicators on which the two parties are to focus talks. Several former prime ministers and finance ministers who negotiated or signed stand-by agreements with the IMF talked to Business Standard about their experiences, and provided advice for the current negotiators. „The best approach in negotiations is to be honest,“ former Prime Minister Victor Ciorbea said. Former Finance Minister Decebal Traian Remes agrees: „The only [thing] that works is the brutal, naked, unnuanced truth. This is who we are, these are our indicators, we have the following targets, and will reach these this way, in stages. As long as they do not catch you in a lie, they will work hard,“ he said.

Speaking of the conditions likely to be imposed – which many fear, because these could include harsh cost cuts and higher taxes, former Finance Minister Daniel Daianu said the country should avoid „a far too tough monetary program, as was the case in 1997 [Ed. n. when Romania was negotiating a stand-by agreement with the IMF]. We should not give in to measures that would allow speculators to act on the exchange rate,“ he said.

Remes said that Romania should not accept fiscal hikes, because lower taxes are those that bring more funds to the state budget. Furthermore, Romania should not accept severe depreciation of the exchange rate, renouncing subsidies for agriculture or fewer budget funds for investments. On the other hand, a „significant reduction in the national administration,“ eliminating some special pensions and public sector bonuses or certain privatizations would be acceptable conditions,“ Remes added.
Lawyer Gabriel Zbarcea, former head of the Authority for State Assets Recovery (AVAS), agrees that Romania should not accept higher taxes, as was the case in Hungary and Latvia, which recently signed agreements with the IMF.
However, a deal with the fund would make Romania more credible, more transparent, and provide a financial safety net. The country’s rating could improve following such an agreement, he added.

Romania held several negotiations with IMF in the 1990s, when its economic situation was more challenging. However, previous agreements did not come to term, because of the problems the country was facing at the time.