Romania will see through the current stand-by agreement with the International Monetary Fund in October, but only after pledging to start negotiations for a new agreement in the very same month.
Following the fourth (and final) economic assessment, IMF’s chief-negotiator Neven Mates left Bucharest without having fully agreed with the Romanian officials on the text of a new supplementary letter of intent.
As always, the Romanian authorities requested dispensations for having failed to meet certain commitments, although the IMF Board had already said it was no longer willing to accept any dispensation, as the agreement had already been extended by five and a half months, because of repeated delays. Consequently, Mates displayed unflinching inflexibility during this recent round of talks.
The Government has until October to meet a new set of preconditions, deemed as much stricter than the previous ones. Although it is likely that not all of these preconditions will be met in due time, the Romanian officials are suggesting the agreement will be formally completed, with the unsolved issues to be transferred to the new agreement.
In fact, even the European Union has asked Romania to maintain close ties with the International Monetary Fund at least until 2007, the envisaged accession timeframe.
“As far as the European Union is concerned, the IMF gives us credibility and the go-ahead for the macroeconomic situation,” says Finance minister Mihai Tanasescu.
According to the minister, economically speaking, “the IMF is 100% right” in its demands. “However, we do need to think about the social component, as well,” Tanasescu stated.
Whereas negotiations on layoffs, liquidations, price increases and interest rate hikes have finally reached common ground, discussions hit a stalemate when the budget deficit came up. The IMF will not okay the Government’s project to increase next year’s deficit to 3.7% of GDP to fund infrastructure investments. Washington experts say the increase should only go up from 2.65% this year to 3% in 2004.
In fact, only when the Government pledged to have a new agreement drafted this year did Neven Mates withdraw his initial request to cut this year’s budget deficit from2.65% to 2.45%.
According to Mates, the IMF is mainly concerned about losses in the energy sector, the non-government lending increase and the salary raises in the state-owned sector, which outpace the economic productivity.
As for Romania’s largest bank, BCR (Romanian Commercial Bank), the new deadline for selling a stake to the European Bank for Reconstruction and Development and the International Finance Corporation is September 15. razvan.voican@zf.ro