Romania and IMF shake hands on 20 bln euro rescue package

IMF will request the parent banks with subsidiaries in Romania to maintain capital at a high level and not to reduce exposure, said Jeffrey Franks, the head of IMF mission to Romania.

Romania must oversee spending on public-sector workers and to reform the pension scheme.

Romania must improve the budget execution and spending, as well as to reform the pension scheme and to better manage the public companies, said Jeffrey Franks.

“The international assistance will help Romania to lower the budget deficit, but only if authorities enforce tax responsibility regulations”, said Franks.

Romania will receive the first 5bln euro installment after it is approved by IMF board.

Romania will receive the first installment of 5 bln euros after the loan agreement is approved by International Monetary Fund board in the coming weeks, said Dominique Strauss-Kahn, the IMF managing director in a press release.

The two-year stand-by agreement with IMF consists in 12.9 bln euro of a total 20 bln euro rescue package.

“IMF mission and Romanian authorities have reached an agreement today, which will be approved by Fund’s management and executive committee. The objective of the rescue package is to mitigate the effects of the drastic reduction of fresh private capital”, said Dominique Strauss-Kahn.

“The executive committee is expected to analyze the program over the next few weeks. Romania will receive 5 bln euro once the agreement is approved by the board”, he added.

IMF loan is designed to strengthen and improve the tax policy on a long-term.

The total funding package is made up of 12.9 bln euro from IMF, 5 bln euro from EU, 1.2-1,5 from World Bank and 1 bln euros from other international institutions. EBRD said it would add 500 mln euros to its investments in the country over the next two years.

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