Loan talks with IMF, a wake-up call for Romanian legislators

After tabling a budget plan for 2009 taking into account a 2.5% economic growth projection, Romanian legislators are also considering the possibility of Romania going into recession after the loan talks with International Monetary Fund.
The Minister of Finance takes into account the possibility of Romania going into recession

Minister of Finance, Gheorghe Pogea said, after loan talks with IMF, that Romania was taking into account the possibility of -1% - 1.5% economic growth for this year, stressing that the situation of Romania is less tougher compared to other countries in the region.

Asked about a possible recession in Romania, the Minister of Finance replied: “For the moment, this is not the only variant, but it is in our attention”.

“I think it’s possible to run an economic growth within the -1-1.5% range, although there are countries in the region with -3% or -4%”, said Pogea.

The talks with IMF and EC experts on the loan will continue until they reach a consensus, the minister added.

The talks between IMF delegation and Bucharest authorities are due to continue on Wednesday, following to hammer out the final points of possible IMF program for Romania, “part of a multilateral funding package”, that would involve the contribution of EU and World Bank.

The budget plan for 2009 takes into account on a 2.5% economic growth, however IMF says it is more likely to see a recession.

IMF said in a press release remitted in early February that Romanian economy could sink this years seeing a mild recovery toward the end of 2009, early 2010.

IMF denies disclosure of the rescue package size

International Monetary Fund, who is currently discussing the terms of a rescue package that could help the country mitigate the effects of the current economic crisis, denies disclosure on the possible size of the loan.

Insiders’ estimates range from five to 20 bln euros, which would include a loan of the European Union. Even so, this is one of the largest loans ever granted in the history of IMF.

Asked about the amount of the funding package for Bucharest, at a media briefing in Washington an IMF spokesperson, David Hawley declined to comment any further.

“There will be an IMF delegation at Bucharest until March 25. The preliminary talks on the impacts of the global crisis in Romania were held in Washington last week and proved to be successful”, said Hawley.

“We are in advanced talks with Romanian authorities and European Union to assess the possible responses, including a technical and financial support from IMF”, he added.

Romanian Minister of Finance, Gheorghe Pogea said earlier this week that Romania would run an economic growth between -1% and +1.5%, while the budget was calculated on 2.5% growth projection.

EU considers a 75-100 bln dollar loan to IMF

The European Union is considering a 75-100bln dollar loan to IMF to increase its lending capacity, according to a document draft prepared for the EU leaders’ reunion scheduled for 19-20 March, Reuters informs.

The draft, which describes the EU position for the G20 summit of industrialized countries in April 2, shows a doubling of International Monetary Fund resources to 500 bln dollars, in order to support the countries with wide payment balance shortcomings.

Therefore, the draft obtained by Reuters proposes the "doubling of IMF lending capacity that would help the Fund to promptly and flexibly help the member states in case of payment balance shortcomings”

"Agree that the EU member states are ready to provide a fast, temporary support of IMF lending capacity in a form of a loan in the total amount of $75-100 billion," draft reveals.

The text, proposed by the Czech EU presidency was not yet passed and could still be subject to certain modifications, Reuters says.

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