In March, Romanian authorities have agreed on a 19.95 bln euro package of funding, 12.95 bln euros from International Monetary Fund, 5 bln euros from European Commission, 1 bln euros from World Bank and another one billion euros from European Bank for Reconstruction and Development, European Investment Bank and International Finance Corporation.
Under the agreement, IMF imposed certain quarterly targets to be met by Romania, which will be reviewed by IMF missions on a regular basis. The mission, due to arrive at end-July will review midyear economic performances, and given the conclusions of the review, the Fund will disburse the second tranche of around 1.9 billion euros. If the review turns positive, the second tranche of the loan will be disbursed to Romania on September 15.
Under the agreement, Romanian authorities should bring the deficits within quarterly target ranges, so that it doesn’t exceed 24.3 billion lei at year-end. For the first quarter, the deficit target is 8.3 billion lei, for second quarter – 14.5 billion lei, and for the end of third quarter – 18.6 billion lei.
The Ministry of Finances, Ministry of Labor and other institutions will send IMF information that a private-company monitoring system is enforced until IMF’s first assessment in Romania, due in July-August.
Under the terms of the IMF agreement, the regulatory framework of the financial market must be changed, so as to give NBR the authority to request capital increases to banks and to cap profit distribution.
The contraction of Romania’s war chest by more than 2 billion euros “in 30 days’ time” during IMF arrangement compels local authorities to consult the Fund’s specialists. NBR is due to consult IMF if inflation exceeds quarterly targets by more than 1%. For the end of this month, inflation target is 6.4%, and it is less probable that it will not be met, considering that at end-May, the annual inflation rate dropped to 5.95%.
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