“For the first quarter, we agreed to RON 8.3 billion (€1.95 bln), for the second quarter RON 14.5 bln (€3.41 bln), and RON 18.6 billion (€4.38 bln) for Q3 2008. By the end of December, the deficit should not exceed RON 24.3 billion (€5.72 bln), Pogea said after yesterday’s government meeting. According to Pogea, if the deficit targets are exceeded, the Finance Ministry will make a budget rectification to adjust revenues and expenditures.
The IMF loan is part of a financing package which Romania applied for earlier this year, worth a total €19.5 billion. Of the total funds, €12.95 bln will be provided by IMF, €5 bln will come from the European Union, while the remaining funds are to be provided by other international institutions, such as the World Bank (WB) and the European Bank for Reconstruction and Development (EBRD). On the other hand, Pogea said that the IMF agreement does not “explicitly” stipulate a drop in salaries, but requires an adjustment of expenses, so that the budget deficit does not widen beyond 4.6 percent of gross domestic product by the end of the year, or €5.72 billion.
Government sources said that the IMF letter gives BNR more freedom to persuade commercial lenders to increase capital or ban these from transferring profits to their mother-banks. IMF representatives told Business Standard that the letter will be made public only after May 4, when officials of the board sign the document. After Pogea and Isarescu signed the IMF letter of intent, Prime Minister Emil Boc said that “Romania is on its final lap for contracting the foreign loan agreed with the IMF and the European Commission.”
