euractiv
Published: 02 November 2010 Updated: 04 November 2010
A joint European Commission, IMF and World Bank mission agreed yesterday (1 November) to release the next tranche of loans due under Romania's international bailout programme, easing concerns over the recession-hit country's finances.
"If the specified actions agreed with the authorities are all taken, the conditions for the fourth disbursement of the EU Balance of Payments assistance programme will be met," according to a statement by the European Commission.
The IMF is expected to make a €900 million payment and the European Commission will disburse a further €1.15 billion.
According to the Commission, Romania is committed to adopting the 2011 budget and to enacting a unified wage law and a revised pension law in cooperation with the EU executive's services.
Bucharest has slashed public sector wages and hiked value added sales taxes to try to cut its budget gap to 6.8% of gross domestic product this year, in compliance with the terms of a €20 billion deal led by the IMF (see 'Background').
Jeffrey Franks, who heads the IMF's Romania mission, said the country was on track to reach that target although wage pressures continued to pose a threat.
If Romania approves its 2011 budget in late December, the IMF would rubber-stamp the disbursement of funds in early January to give Bucharest enough time to put together sound policies, Franks said.
EurActiv Romania quotes Franks as admitting that public sector salaries could increase slightly in 2011, but any decision would have to be carefully analysed. In the event that higher increases are foreseen, the government would need to make cuts in the administration, he explained.
"The decision [to release balance of payments support] was priced in by markets," said Ionut Dumitru of Raiffeisen Bank in Bucharest, quoted by Reuters. "We would have seen an impact if an agreement was not reached and things derailed," he added.
Funds are flowing back into many parts of Central Europe but investors remain wary about Romania due to its rocky politics. The fragile coalition government only narrowly survived two no-confidence motions in just 10 months.
Background
In March 2009, Romania secured a large financial assistance package in an IMF-led deal with EU participation.
It was announced that out of the overall 20-billion euro loan, the IMF will provide 12.9 billion, the European Commission five billion and the World Bank 1.5 billion. About one billion will be raised by other financial institutions.
Romania will not pay any interest in the first two years, after which a payback period of three to five years will follow.
The EU's participation comes from an emergency facility to bail out EU countries that are not members of the euro zone.
Created in 1988, the EU facility was used for Hungary in October 2008, when it suffered the full blow of the financial turmoil (Budapest received a bail-out to the tune of 6.5 billion euros). The facility has since been increased from 12 to 25 billion euros.
The funding comes from the money markets. The Commission borrows money from the markets using EU-denominated bonds.
euractiv
http://www.euractiv.com/en/euro-finance/romania-secure-balance-payments-support-news-499359
Published: 02 November 2010 Updated: 04 November 2010
A joint European Commission, IMF and World Bank mission agreed yesterday (1 November) to release the next tranche of loans due under Romania's international bailout programme, easing concerns over the recession-hit country's finances.
"If the specified actions agreed with the authorities are all taken, the conditions for the fourth disbursement of the EU Balance of Payments assistance programme will be met," according to a statement by the European Commission.
The IMF is expected to make a €900 million payment and the European Commission will disburse a further €1.15 billion.
According to the Commission, Romania is committed to adopting the 2011 budget and to enacting a unified wage law and a revised pension law in cooperation with the EU executive's services.
Bucharest has slashed public sector wages and hiked value added sales taxes to try to cut its budget gap to 6.8% of gross domestic product this year, in compliance with the terms of a €20 billion deal led by the IMF (see 'Background').
Jeffrey Franks, who heads the IMF's Romania mission, said the country was on track to reach that target although wage pressures continued to pose a threat.
If Romania approves its 2011 budget in late December, the IMF would rubber-stamp the disbursement of funds in early January to give Bucharest enough time to put together sound policies, Franks said.
EurActiv Romania quotes Franks as admitting that public sector salaries could increase slightly in 2011, but any decision would have to be carefully analysed. In the event that higher increases are foreseen, the government would need to make cuts in the administration, he explained.
"The decision [to release balance of payments support] was priced in by markets," said Ionut Dumitru of Raiffeisen Bank in Bucharest, quoted by Reuters. "We would have seen an impact if an agreement was not reached and things derailed," he added.
Funds are flowing back into many parts of Central Europe but investors remain wary about Romania due to its rocky politics. The fragile coalition government only narrowly survived two no-confidence motions in just 10 months.
Background
In March 2009, Romania secured a large financial assistance package in an IMF-led deal with EU participation.
It was announced that out of the overall 20-billion euro loan, the IMF will provide 12.9 billion, the European Commission five billion and the World Bank 1.5 billion. About one billion will be raised by other financial institutions.
Romania will not pay any interest in the first two years, after which a payback period of three to five years will follow.
The EU's participation comes from an emergency facility to bail out EU countries that are not members of the euro zone.
Created in 1988, the EU facility was used for Hungary in October 2008, when it suffered the full blow of the financial turmoil (Budapest received a bail-out to the tune of 6.5 billion euros). The facility has since been increased from 12 to 25 billion euros.
The funding comes from the money markets. The Commission borrows money from the markets using EU-denominated bonds.
euractiv
http://www.euractiv.com/en/euro-finance/romania-secure-balance-payments-support-news-499359
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