Press Release No. 12/372

Press Release No. 12/372
September 28, 2012

The Executive Board of the International Monetary Fund (IMF) today completed the sixth 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 to treat 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 €512.9 million, or about US$663.1 million) available for disbursement, bringing the total resources that are currently available to Romania under the SBA to SDR 2.640 billion (about €3.2 billion, or about US$4.1 billion).

The SBA was approved on March 25, 2011 (see Press Release No. 11/101) in the amount of SDR 3,090.6 million (about €3.7 billion, or about US$4.8 billion).

In completing the review, the Executive Board also approved a waiver for the nonobservance of a performance criterion regarding central government and social security domestic arrears, and the modification of the performance criterion concerning the net foreign assets of the central bank.

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

“Romania continues to make good progress under the precautionary program. All performance criteria and indicative targets were met except for the central and local government arrears. Nevertheless, the economic outlook remains challenging due to the difficult external and internal environments that have led to exchange rate pressures and undermined confidence. Growth is expected to slow while inflation is approaching the upper bound of the NBR’s target band. Steadfast program implementation is essential to preserve the hard won macroeconomic stability, and boost investment and growth potential.

“The authorities have maintained strict spending discipline consistent with the goal of lowering the budget deficit to 3 percent of GDP in 2012. Remedial measures to ensure a decline in arrears remain a priority. A slowdown of capital outlays will be required in light of the recent interruption of EU fund disbursements for some programs. Additional efforts are needed to improve tax administration and reform the health care, energy and transportation sectors. While progress is being made towards liberalizing energy prices, it will also be important to step up the reform of state-owned enterprises.

“The banking system maintains significant buffers to deal with rising non-performing loans and potential spillovers from elsewhere in Europe. However, the authorities should remain vigilant and continue to strengthen the financial-sector safety net and contingency planning. Intervention in support of the leu should be limited to smoothing exchange rate volatility.”