Two months ago, Romanian government collapsed in a Parliamentary no-confidence vote, which offset a political crisis that is already spilling over the economy. The national currency was put under extreme pressure, minimized by central bank’s repeated interventions in the FX market, while the political uncertainty hands over BSE stocks.
An IMF mission will visit Romania today to discuss the 2010 budget plan together with the European Commission, Finance Ministry officials said. The country is very likely to ask its lenders to extend deadlines depending on the new data.
“It will be a short mission, of 1, 2 or 3 days to complete the 2010 budget plan. There is a slight difference between us (IMF), Commission and authorities… We must clarify the time zero so whoever is in charge takes into account certain public policies. There is a small difference regarding the exposure on revenues, and authorities will hammer out the final points on certain indicators”, Romania’s IMF representative, Mihai Tanasasescu said.
“Romanian authorities may ask IMF to extend deadlines”, he said when asked whether the country was likely to ask for new extensions, as arrears have exceeded the level agreed with the International Monetary Fund both in second and third quarter, and pension law must be adopted by December 31.
Notwithstanding the caretaker government’s permission to proceed with the 2010 budget plan in the Parliament, economists say the chances of being passed before the end of the month are low.
Romania is not at risk of not meeting public sector payments, Tanasescu continued, should the IMF fail to disburse the third tranche of the loan this year, since “the Ministry of Finance has probably attracted the amounts it needed beforehand”.
IMF representative to Romania, Tony Lybek said the International Monetary Fund would stand firm on the target for Romanian 2010 budget gap, of 5.9%, which is a comfortable target even in the event of Romania’s failure to unlock the political deadlock. The budget gap agreed with the Romanian authorities is pretty comfortable, and IMF has been flexible in its talks with Romania.
However, meeting the 5.9% target range is not enough, IMF representative continued, since the public expenses structure is monitored as well. However, Lybek refused to comment on cost-containment actions.
“The last thing we want to do is escalate the crisis in Romania. We want to make sure it will stand below 3% in a sustainable way”, Lybek pointed out.
The representative added that IMF “hopes” Romanian 2009 budget gap would be contained within the 7.3% target range of GDP, as IMF’s latter projection announced during its October-November mission suggested a 7.8% deficit.
The Jan-Nov budget deficit stood at 6% of GDP, according to the preliminary results made public by the Ministry of Finance.
Government tries to convince IMF to disburse the third tranche
The Government will try to convince today the IMF to disburse the third tranche under support package, “since all program targets agreed have been met”, said the caretaker minister of Finance, Gheorghe Pogea.
The caretaker minister said the main parameters assumed in the 2010 budget plan remained – a budget gap of 5.9% of GDP and an economic growth of 0.5%. However, investments scheduled for next year will have a bigger weight in the Gross Domestic Product compared to this year, namely 7%.
“The 2010 budget plan envisages massive investments in infrastructure, environment and education as well as in the regional development which would create new jobs. A 525 billion lei budget involves 38-40 billion lei expenses, which equates 7% of GDP”, said Gheorghe Pogea.
“Furthermore, the economic growth assumed for 2010 will generate additional revenues, since we expect a growth of 8=10 billion lei”, he added.
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