26 June 2013

IMF completes seventh and eighth reviews under the SBA for Romania

The Executive Board of the IMF completed the seventh and eighth reviews of Romania's performance under its economic programme supported by a 24-month Stand-By Arrangement. Completion of the reviews makes an additional amount of €520.74 million available for disbursement.

In completing the reviews, the Executive Board approved three waivers for the non-observance of the performance criteria on net foreign assets of the National Bank of Romania, the general government balance, and the central government arrears, based on corrective actions taken by the authorities.

Following the Executive Board’s discussion on Romania, Ms Nemat Shafik, Deputy Managing Director and Acting Chair, said: “Romania has successfully concluded the second of two Stand-by Arrangements with the Fund. The economy has stabilised. Core inflation remains low, and the fiscal and current account balances are sustainable. However, growth is weak and downside risks exist. Structural reforms are critical to realising Romania’s growth potential and creating jobs, while continued fiscal discipline is essential to anchor macro-economic stability.

“Significant fiscal adjustment since 2009 has enabled Romania to exit the EU Excessive Deficit Procedure in June. The government’s intention to further reduce the structural deficit at a moderate pace to reach its medium-term deficit objective is appropriate. The budgetary framework will also benefit from the establishment of an effective commitment control system and strict prioritisation of public investment which would help to avoid recurrence of arrears. Tax administration and healthcare reform along with tax base broadening measures are also needed.

“Reform of the energy and transport sectors and of state-owned enterprises remains incomplete. The authorities have begun gradually to raise gas and electricity prices and establish a more competitive energy market while taking steps to protect vulnerable consumers. These measures are welcome, but more must be done to reform inefficient state-owned enterprises, including through greater private-sector involvement.

“The monetary policy stance is broadly appropriate. Romania’s banking system is well capitalised, but vulnerable to external shocks. Accordingly, the authorities should continue to improve their crisis management arrangements and contingency planning. In particular, further efforts to remove obstacles to the resolution of non-performing loans are needed and corporate governance weaknesses at the new unified financial supervisor should be addressed”.

Full press release

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