What will Romania do if funds from IMF and EU are delayed until next year?

The state needs at least 3.5 billion euros to cover the budget deficit from foreign funding in the last three months of the year, but because of the political crisis it might be forced to find other solutions and thus turn the local banks for money and to NBR for support.
The dramatic effect of the Finance Ministry’s return to the domestic market as it did at the beginning of the year would be the draining of the last available funds for lending to the private sector and implicitly the significant increase in interests in RON, which have reverted to over 10% anyway.
The absence of a negotiation partner at the Victoria Palace (Government’s HQ) made the IMF postpone the assessment on which the 1.5 billion euro tranche scheduled for December depends, and the delay in putting in place a new government is threatening the 1 billion-euro tranche expected from the EU, as well. The political crisis also put on hold the Finance Ministry’s plan to sell about 1 billion euros in eurobonds on the international market.
Adding these amounts up leads to a total of 3.5 billion euros that the budget will not be able to rely on as planned, so that expenses need to be cut at the end of the year and other local financing alternatives need to be found. President Traian Basescu warns that unless the new government is put in place soon, there is a risk that either pensions and salaries will not be paid in full, or investments will not be paid.
“There is a risk of not getting the next tranche of the loan if conditions are not met. I do not want this to happen,” said the premier appointed, Lucian Croitoru, who is trying to get support from parties, even though he stands little chance of gaining that.
The only option the Government has to get money is to turn to the domestic market, but at much higher costs, analysts say.
“The financing solution can only be (found on the) domestic (market) and there are two ways for it: financing in RON or in foreign currency. Financing in RON, however, tends to become slightly more expensive even on short term given the current political crisis,” believes Lucian Anghel, chief economist of BCR.
Melania Hancila, Volksbank’s chief economist, believes that financing in foreign currency would be the better option.
“On short term, the state could get funding from the domestic market. The financing in foreign currency would be cheaper especially since the NBR has cut minimal reserves lately, and most of the money freed up is still in the banks’ accounts.”
She does not rule out the possibility that, depending on the necessary amount, the central bank might cut minimal reserves again, so that the Finance Ministry would absorb the money freed up through the already proven mechanisms. “Of course there is also the option of NBR cutting minimal reserves in the last monetary policy meeting this year (November 3), so that the money freed up would go to a club loan,” Hancila said. In July, eight banks granted to the Government such a loan worth 1.2 billion euros at a 5% yearly interest.