"In the early months of the program, the biggest achievement has been a stabilization in the financial situation. The interest rates in Romania have come down, the risk premium on international markets on Romania has come down from about 750 basis points to 250 basis points since the program was negotiated”, said Jeffrey Franks according to a video posted in the IMF website.

“Also, pressure on the exchange rate has eased considerably. The exchange rate has stabilized and central bank reserves have begun to grow. All of these things are setting the stage for future growth because we have a more stable financial system, despite the world crisis."

The IMF board has approved earlier, the first review under stand-by arrangement, and revision of certain provisions following a higher-than-expected drop in GDP.

The completion of the first review enables immediate disbursement of the second SDR 1.718 bln (€1.854 bln) tranche which will be available within 48 hours. The total disbursements under the program amount to SDR 6.088 billion (about €6.570 billion or US$9.665 billion).

Franks said the IMF had decided to adjust the program targets going forward “to make them more realistic looking at the worsening economic situation”.

“We now expect that growth in Romania is going to drop down to minus 8% or minus 8.5%, compared with minus 4% we had in the original program and that's forced us to adjust the fiscal targets as well. There's going to be a balance between some additional fiscal adjustment that's needed but also a larger deficit than was originally forecast."

The IMF official said the Romanian government had committed to reducing some of the excesses in public spending that occurred over recent years, in order to “make the fiscal situation more sustainable on a medium term”.

“The biggest excess was in public sector wages which had risen from under 6% of GDP a few years ago to 9.5% of GDP”.

Jeffrey Franks added the country’s authorities wanted to preserve room for capital spending which would allow for faster growth in the future while bringing the total public spending down.

“So they are going to implement a series of plans both to change the wage system in the public sector and also to reduce the number of public servants so as to bring the wage bill back down to about 7% of GDP," Franks said.