Press Release No. 10/354

Press Release: IMF Completes Fifth Review Under Stand-By Arrangement with Romania and Approves €884.0 Million Disbursement

September 24, 2010

The Executive Board of the International Monetary Fund (IMF) today completed the fifth review of Romania’s economic performance under a program supported by a 24-month Stand-By Arrangement (SBA). The completion of the review enables the immediate disbursement of SDR 769 million (about €884.0 million or about US$1.19 billion), bringing total disbursements under the program to SDR 9.8 billion (about €11.27 billion or about US$15.11 billion). In completing the review the Executive Board also approved Romania’s request for a waiver of non-observance of the end-June 2010 performance criterion on general government domestic arrears.

The SBA was approved on May 4, 2009 (Press Release No 09/148) in the amount of SDR 11.443 billion (about €13.15 billion or about US$17.64 billion). The arrangement entails exceptional access to IMF resources, amounting to 1,111 percent of Romania’s quota.

Following the Executive Board's discussion on Romania, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, stated:

“Policy implementation under the Fund-supported program has remained strong despite ongoing economic weakness. After recently undertaking an ambitious fiscal adjustment, the authorities’ efforts are focused on structural reforms that will secure fiscal sustainability and strengthen medium-term growth prospects.

“The recent fiscal consolidation effort has set Romania on a clear path to meeting its short and medium-term fiscal goals. The main challenge now is to ensure the continuity of the adjustment through continued spending restraint and fiscal structural reforms. Key measures include the recent pension reform, reforms of the public wage system, tax administration, and health sector, and restructuring public enterprises. The initiation of labor market and social safety net reforms will help boost productivity and target limited budgetary resources to the most vulnerable. Priority should be given to permanently resolving the issue of domestic arrears by way of improving payment discipline in the economy and increasing the credibility of the authorities’ adjustment efforts.

“The authorities’ monetary and financial sector policies have been appropriately prudent and proactive, helping preserve financial stability in the face of the global financial crisis. The temporary rise in inflation following the recent VAT rate increase calls for caution in gauging the room for further monetary easing. The banking system remains liquid and well-capitalized, but continued vigilance in financial sector supervision is crucial to assure financial sector resilience against the unsettled regional situation and increasing non-performing loans”.