More IMF negotiations to follow next year

Talks between Government officials and the International Monetary Fund (IMF) delegation over a new one-year agreement will resume early next year.

IMF’s chief-negotiator, Neven Mates ends his prolonged visit today, without the letter of intent that is supposed to be discussed by the Fund’s Board.

The Finance Ministry on Monday hosted the final meeting, attended by Finance minister Mihai Tanasescu, Privatisation minister Ovidiu Musetescu, state secretary with the Economy Ministry Iulian Iancu, as well as representatives from Termoelectrica, Electrica, the National Regulation Authority for natural gases and the Labour Ministry. Neven Mates met with Premier Adrian Nastase yesterday.

The Fund is urging the Government to finalise the privatisation projects in the energy sector. Thus, the IMF has requested Romanian authorities to make all the necessary efforts to see the privatisation of SNP Petrom completed by March 2004. Moreover, the IMF is still hoping that the privatisation of the Banat and Dobrogea subsidiaries of electricity company Electrica will be finalised by yearend.

One major issue in the future agreement is the set of measures that need to be enforced to cut arrears and prevent new debt accumulation. The Government must persuade the IMF negotiators that it is able to efficiently apply thorough restructuring programmes at the companies subordinated to the Ministry of Economy and the Ministry of Transports, which should lead to cost cuts. Negotiations also revolve around mine closing and railway restructuring.

Furthermore, the IMF experts want the new agreement to include measures meant to slow down the growth pace of the current account deficit, which is very close to reaching 5% of GDP.

According to the IMF, an increased budget deficit (from 2.7% of GDP in 2003 to 3% next year) will not hurt the current account deficit and inflation targets, provided the Government implemented several measures such as raising utilities prices and restructuring loss-making state-owned enterprises (mainly in the mining and transports sectors).
razvan.voican@zf.ro