Where is the leu heading this year?

The agreement between the Romanian authorities and International Monetary Fund must go back to the negotiating table, said Ionut Dumitru (photo), senior economist of Raiffeisen Bank Romania. He said the country has slim chances to meet IMF targets this year.

“If the International Monetary Fund puts off the disbursement of the third tranche of the loan is not a tragedy! It is clear that the aid deal with IMF must go back to the negotiating table because in December, almost all economic targets will be missed. The budget gap was contained within the target range set by the IMF, but will exceed 7.3% of GDP by the end of the year, because no cost-cutting measures have been put in place so far, and the authorities have run out of time”, said Ionut Dumitru.

After the Fund’s mission in August, the Romanian authorities and the International Monetary Fund agreed on a new budget gap target for this year of 7.3% of GDP (36.5 billion lei), an economic contraction of 8.5% and a GDP of 497.3 billion lei.

Romania has no chance of narrowing the budget gap to 5.3% by the end of next year without raising taxes, the economist continued, even though it would be the worst solution at hand.

“Furthermore, 2010 budget is another problem, but what budget are talking about if we don’t even have a government? The IMF aid deal has gone off track to a certain extent, and must be brought back to the negotiating table, and this puts us in a difficult position, because we failed to do our homeworks”, Raiffeisen’s senior economist said.