Press Release No. 11/475

Press Release No.11/475
December 19, 2011

The Executive Board of the International Monetary Fund (IMF) today completed the third review of Romania’s economic performance under a program supported by a 24-month Stand-By Arrangement (SBA). The authorities have indicated that they will continue treating the arrangement as precautionary and therefore do not intend to draw under it.

Completion of the review makes an additional amount equivalent to SDR 430 million (about €507 million, or about US$661 million) available for disbursement, bringing the total resources that are currently available to Romania under the SBA to SDR 1.35 billion (about €1.6 billion, or about US$2.1 billion).

The SBA was approved on March 25, 2011 (see Press Release No 11/101) in the amount of SDR 3.1 billion (about €3.6 billion, or about US$4.7 billion) and came into effect on March 31, 2011.

Following the Executive Board’s discussion on Romania, Mr. David Lipton, First Deputy Managing Director and Acting Chair, said:

“Romania has made good progress under the Fund-supported program. Policy implementation has remained strong and all program targets were met. Economic growth has resumed while inflation has fallen. However, risks have risen considerably due to the financial turbulence in the euro area. Continued commitment to the economic reform agenda is crucial to help withstand current uncertainties.

“The authorities are on track to meet their fiscal targets for 2011, and their 2012 budget should bring the deficit well below 3 percent of GDP next year. Plans to address the chronic financial problems in the health care sector and to improve tax administration are welcome. Further progress is also needed to improve absorption of EU funds. Additional efforts to reform state-owned enterprises, together with enhanced regulation and improved market-oriented pricing, will be essential to reduce arrears, improve economic efficiency, and boost growth.

“Risks in the banking system, arising from difficulties elsewhere in Europe, warrant strong supervisory vigilance. The focus should be on enhanced monitoring and detailed contingency plans—including procedures for using the newly enhanced bank resolution powers—to guard against possible contagion. While inflation has dropped sharply, monetary policy should remain cautious given current uncertainties.”