News Brief: IMF Completes Romania Review, Approves Extension and US$116 Million Credit

June 7, 2000

The Executive Board of the International Monetary Fund (IMF) today completed the first review under the stand-by credit for Romania and approved the extension of the credit to February 28, 2001. As a result, Romania will be able to draw up to the equivalent of SDR 87 million (about US$116 million) from the IMF.

The stand-by credit, which was approved in August 1999, totals an amount equivalent to SDR 400 million (about US$535 million), of which Romania has drawn SDR 53 million (about US$71 million).

In commenting on the IMF Executive Board discussion, Stanley Fischer, First Deputy Managing Director, said:

"There has been a significant improvement in Romania's external position since mid-1999, in response to the strengthened policies that were introduced in order to avert a financial crisis. As a result, there was a large reduction in the current account deficit, a strong rebound in exports, and a steady recovery of foreign exchange reserves. The strengthened policies that generated this adjustment are laying the basis for renewed growth and declining inflation.

"Looking ahead, determined and sustained implementation in 2000 and beyond of the macroeconomic and structural policies agreed in the program will be essential in ensuring lasting growth. Maintenance of the proposed fiscal stance and strict adherence to the program targets in the areas of incomes policy and domestic arrears are crucial to the attainment of the program's key macroeconomic targets, and would also enhance financial discipline in the economy more generally.

"Regarding structural reform, improved supervision of both the bank and non-bank financial sectors is critical. While the swift adoption of measures in response to the collapse of certain non-bank financial institutions is welcome, the authorities should follow through on these measures expeditiously, and, with World Bank assistance, quickly undertake a comprehensive program to address structural weaknesses in the regulation and supervision of non-bank financial institutions. The authorities' measures to address weaknesses in governance, which have contributed to the recent problems in the financial sector, are also welcome. Other noteworthy elements of the program include the restructuring and privatization of one major state-owned bank and the privatization of another this year, and an ambitious enterprise privatization program, which includes the offer for sale of many of the largest enterprises remaining under state ownership," Fischer said.


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