Tanasescu: An IMF loan to improve local economy

 

 “Such an agreement must be considered a partnership for a certain period to adjust public policies, especially on the fiscal segment,” Tanasescu said.

He added that the new Government should focus on a 2009 budget that is based on the current economic situation and possibilities to finance the budget deficit.

According to Tanasescu, the conditions imposed by the IMF for a possible agreement will mainly focus on durable and predictable fiscal policies, structural reforms, including to consolidate the financial system, and monetary policies that lead to further disinflation.

However, according to President Traian Basescu, Romania will only ask for an IMF loan as a last resource. “This is the last thing Romania will do,” he said.

“We must be very careful because we have a problem: Romania’s economy can no longer fit in the Fund’s matrix. We exceeded the edges of the matrix imposed by the Fund to an economy and not only, to the society also,” Basescu said. He added that there are other solutions to find the money that Romania needs. “We can work with the EU, the World Bank, the European Investment Bank,” he stressed.

Finance Minister Gheorghe Pogea last week said that Romania could ask for an IMF or EU loan. “Our main concern is to obtain financing for expenses that we approved in the budget, to make the economy work,” he said. Current account deficit considered for 2009 is 10.3 percent of the Gross Domestic Product (GDP), while the public deficit is seen at 2 percent, he added.

According to Government sources, Romania needs financing worth at least €4 billion, but the figure can change depending on the budget priorities.

“A possible IMF and / or EC loan will be aimed to cover the balance deficit and to increase international reserves, which will the strengthen macroeconomic basis and will indirectly have a positive impact on financing and borrowing possibilities for the real economy,” Tanasescu said. Furthermore, he added it would help attract new foreign investments and create jobs and faster economic growth.

The latest Government estimates for 2009 show economic growth of only 2.5 percent, compared to 7.8 percent last year, and budget deficit of some 2 percent of the GDP. Due to the global financial crisis, which affected Romania last year and is to further impact on the economy in 2009, the number of unemployed is also to rise to some 500,000 compared to in excess of 400,000 last December.