IMF readies to ease conditions attached to the program with Romania

International Monetary Fund is ready to ease fiscal conditions attached to the loan arrangements with Romania, Latvia and Hungary, on worsening economic conditions.
Anne-Marie Gulde-Wolf, senior advisor in IMF’s European department said is was possible that Ukraine, a non-member of the European Union, unlike Romania, Latvia and Hungary to receive additional funds apart from the 16.4 billion dollars loan, after an official said Kiev could further seek funds.

The IMF official added that the media reports that IMF would allow Budapest to raise its fiscal deficit target to 3.9% of GDP within the IMF’s review of Hungary’s lending program of 25.1 billion dollars, are taken into consideration and that there would be no change in Latvia’s policy of keeping its currency pegged to euro.

The Q1 economic growth statistics made public last week showed the economic contraction that affected the eastern European EU members threatens to push the gross domestic product well below IMF’s projections.

IMF expects Latvia’s GDP to shrink 12% this year, while Q1 figures indicate an 18% decline.

Riga asked the approval to widen its fiscal gap to 7% of GDP, from 5%, level agreed with the Fund, and Gulde-Wolf said it was possible to see a further adjustment.

The fund is due to complete a review mission in Hungary. Hungarian media said Budapest asked the permission to lift fiscal deficit target to 3.9% of GDP than the level agreed with IMF of 2.9%.

Gulde-Wolf said the perspective looks realistic, although the issues were still on the negotiation table. “I don’t want to comment the exact number, but the ballpark figure is correct”, said the IMF official.

As for Romania, who recorded a decline that topped expectations in January-March, of 6.4%, the IMF official said the reviewing proceeding was identical. “If the global environment changed, rather than policies, than we should analyze the reassigning the programs”, Gulde-Wolf added.

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