How international institutions will finance Romania

Following a stand-by agreement with the IMF, some €12 billion, which means about two thirds of a total package worth €19 bln, would enter the reserve of the National Bank of Romania (BNR), which the central bank could use to stabilize the leu/euro exchange rate, according to Minister of Transportation Radu Berceanu.

One third of the loan will help re-launch lending, which is now “either blocked or too expensive,” according to Boc. Some €5 bln would come from the EU into the Ministry of Finance account, plus a further €2 bln made available by the World Bank (WB), approximately €1 bln, the European Bank for Reconstruction and Development (EBRD), and the European Investment Bank (EIB), said First Vice President of the Democratic Liberal Party (PDL) Theodor Stolojan. “This will be the most rapid agreement. It will be a done deal by the end of the month. The money would be attracted in two years,” Stolojan added.

Last week, IMF presented Romanian officials with a rather grim forecast for this year, with a four percent drop in gross domestic product (GDP) and a 4.7 percent budget deficit, compared to the initial 2.5 percent growth estimate by the Ministry of Finance.

“The Treasury receives this money, sells it on the market or to the National Bank, and obtains lei. Thus, it avoids borrowing directly on the market, from banks, and does not leave the private sector without funds, considering that liquidity is low anyway,” Stolojan added.

Prime Minister Emil Boc announced yesterday, at the end of the Inter-ministerial Committee session on ensuring financing, that the loan which Romania is about to take out is just a precautionary measure, considering that “we do not desperately need this money.” “We are negotiating with the European Commission, IMF, the World Bank, the European Investment Bank, the European Bank for Reconstruction and Development to take out a

loan to support the budget deficit and economic activity, and I want to make clear that signing such an agreement is just a precautionary measure. What we want is to limit the negative effects of the crisis,” Boc said. The IMF will meet the chairmen of the mother-companies of the top 10 foreign banks in Romania, on Thursday, 26 March, in Vienna, to ensure that these will continue to support the local market, said sources in the banking system. According to Minister of Economy Adriean Videanu, the IMF and the EC congratulated the Ministry of Finance for the realistic and responsible way in which it drafted this year’s budget.