It's not about philanthropy!

(story to be published in tomorrow’s issue, March 10)

Paraphrasing Mr. Basescu in an interview, which has already become and perhaps will even remain famous, the Ciorbea Government was bad, the Vasile Government was bad, the Isarescu Government is bad, only the IMF, of course, is good, because it is the only one! But the Ciorbea Government did everything the IMF told it to, and it came out wrong. And the Ciorbea Government did everything the IMF told it to, and it came out wrong, too. And it probably won’t do any good if the Isarescu Government eventually converts to whatever the IMF says, and will not insist on doing anything more than has been done so far, as he in fact promised with the adopted fiscal programme. For the simple reason that what has been done so far is not a success. But the IMF cannot admit that an economic decline for three consecutive years is a failure and has already resorted to reprisals against the Isarescu Government because it is trying to do something else than the narrow-vision IMF prescriptions. Invoking budget vulnerability stemming out of “overly optimistic” assessments of revenues and expenditures, the IMF gave out a fairly transparent message to Romania – say goodbye to the assistance it may have imagined it would get from the organisation. The Isarescu set out with the goal of promoting economic growth by stimulating investments, without first waiting, according to IMF prescriptions, for inflation to calm down and the exchange rate to stabilise. Which would probably never happen! In fact, the change of economic policy was dictated by the unusual fall itself of the economy in the last three years, which has unfortunately been the only sensible result of the applied IMF prescriptions, because inflation and devaluation of the leu could not be stopped, although regarded as a priority. A priority that was above, and unfortunately damaging to, economic growth! After years and years of IMF-type macro-stabilisation policies, did inflation come to a halt? Never. Only in the last three years, prices have grown almost 5.7 times! Or was the leu’s devaluation stopped? Never. The leu dropped more than 4.5 fold in the last three years! But GDP did drop 20% in the same period. With a balance like this, Romanian and IMF officials should think of a credible and based motivation to pursuing, in one form or another, the accord between Romania and the IMF, configured as an extension through December 31 of the agreements that are valid, for now, through March 31. Of course, Romania needs the IMF and not vice versa, but the people of this country, oppressed by more and more restraints in the last years, during which the IMF recipes have been enforced, must receive an explanation as to what they are getting out of dealing with the IMF out of dealing with the IMF, if not themselves, at least the country. Unfortunately, without even thinking about looking for explanations, the IMF proceeds to reprisals because Romania dares attempt to stop falling economically. The rest are mere alibis because vulnerabilities in a Romanian budget can always be found by the dozens! It is rightfully said that Romania cannot live isolated from the international financial community, the IMF being one of its pillars, and that the relationship with the IMF, albeit unpleasant and uncomfortable, is nevertheless better than the lack thereof, because its existence in itself offers foreign credibility. Such an argument is not only insufficient, but reflects the lack of truly conclusive arguments. Did the IMF, through the accord signed last year, grant us foreign credibility? Not by the least! The IMF accord did not give Romania a better credit rating from international evaluation agencies, or any foreign investments, which the IMF thinks it bails in and even hypothetically banks on them as a unique element of construction in its programmes, which in rest are nothing but demolition and more demolition! On the contrary, the IMF accord, as it suppresses fiscal facilities on budget considerations, has scared away the last investors that were still wandering through Romania. And perhaps this would have been nothing, but at a time of debt service peak, the IMF sent Romania on the international private capital market with the public and official obligation to borrow – or else lose the credibility certificate. In other words, it was tossed into the lions’ pit, along with a handful of other countries that were equally miserable and at IMF’s whim. The paroxysm was that the IMF itself – which is supposed to assist you – signalled to the private market that you are about to default and, at least indirectly, invited private capital to plunder us. We were lucky that this completely incorrect experiment was rejected by the American private capital, which behaved fairly in the rules of the market game, refusing to lend and become a loan shark at IMF’s demand. Unfortunately, Romania got nothing following the IMF accord last year. The IMF only supplied Romania with $70 million that year, which has probably been the most difficult in the last decade – anyway, the year with the highest foreign-debt payments, almost $3 billion. Romania has been obliged to make these payments alone, ending 1999 with a significant net drop in foreign debt, a fact that occurred only during Ceausescu, and which is absolutely abnormal for a country that is said to receive foreign assistance in development. This is not foreign financing but its opposite! Of course, the IMF should not pay Romania’s debts, which is Romania’s own business, but if it does not imply some minimum foreign aid, what good will a foreign assistance accord do? The foreign adjustment Romania was constrained into in 1999 is equivalent domestically to about 4 salaries out of the 12 monthly salaries paid to an employee receiving the average net salary per economy. It is truly surprising that Romania did not explode socially. And even if it didn’t last year, this year it will, if the same line is pursued! Because – let’s make things clear – last year there was no social explosion because part of the foreign adjustment was supported out of the National Bank’s hard currency reserve, and another portion, so as not to fall on people’s shoulders, was converted to domestic public debt, and will be paid out of the budget this year or starting this year. The year 2000 constraints are much more powerful domestically than abroad, namely because of this transfer toward the budget. Without a foreign contribution, the budget will probably be unable to cope domestically. Without the green light from the IMF, foreign money will not effectively reach Romania. It has been announced already that, because of procedural reasons, funds promised by the European Union will not arrive this year. Not surprisingly. The European Union has its own fights with the IMF, but it is an illusion to think that it would fight the IMF over Romania. Normally, the IMF should have made a gesture to unlock entries of foreign resources in Romania. The IMF is not a philanthropic institution, and Romania is not Russia, for which even the intransigent IMF occasionally does philanthropy. But a social explosion in Romania now is a luxury even the IMF probably cannot afford. And a $100 million gesture, as part of the controversial second instalment, would not even compare to the billions offered to Russia, and the money would have gone to a country that has often proved unreliable, saying one thing and doing another, but which has never embezzled IMF funds. And it couldn’t be a philanthropic manifestation, because, let’s face it, poor Romania is, however curious that may sound, in the position of creditor rather than debtor for the IMF. The reality is that Romania does not need the $100 million, mentioned for the sake of example, or other money from the IMF. With its reserves and with the funds that are certain to enter the country, Romania will be able to finance its foreign debt peak, both the foreign debt and the current account deficit, which will probably be even thinner than last year. Romania could have used the money from the European Union in order to ease with foreign funding the burden of domestic public debt repayments, either by tightening the rope around people’s neck, or by building something, because it has demolished and demolished without putting anything back into place. On the other hand, IMF money, being by their nature designed to strengthen the country’s hard currency reserves, would have stood idle in the National Bank’s vaults and could not have been used in the economy. Romania needs something else: normal relations as part of the world financial community, including economic diagnosis from the IMF. Romania is entitled, as part of this community, to a statute matching its potential and incapacity, without favours, and without discrimination. Because it seems to be subjected to discrimination, as it shows in the treatment it received in 1999 and continues to receive this year. Unfortunately, people seem to exist within the IMF structures that have not only stuck to fetishes created by themselves, but who, faced with the fabulous economic failures caused namely by these fetishes around the world and especially in the ex-communist space, including Romania, are consuming an authority crisis exercising intransigence on nonsense.