Traian Basescu won't sign the International Monetary Fund Memorandum

Romania’s President, Traian Basescu, announced yesterday that he will not approve the International Monetary Fund (IMF) memorandum, as he is against the 7 eurocents increase of the excise duty on fuel the Government undertook to introduce.

In this situation, the economic memorandum and the letter of intent will not be discussed within the IMF Board Meeting this December. Traian Basescu said, though, that the arrangement Romania concluded with IMF should be negotiated again in January, 2014 so as to exclude the obligation of applying such an excise duty on fuel.

Basescu explained his decision of not signing the memorandum during a press statement – ‘So, I will not take this measure, which I consider to be antieconomic, against Romania’s interests and economic recovery.’ He went on arguing that Romania does not depend on the financial arrangement with the Fund and that there will be no financing issues arose from renegotiating the agreement with IMF ‘especially given the fact that the reason for which I do not approve this memorandum and the letter of intent is related specifically to the economic recovery. I do not want measures meant to hold back the economic recovery and the money that would be raised from this additional excise duty, whose value stipulated by the letter is of 7 eurocents, but in fact, in gas stations, it will be 12 eurocents because VAT applies, inflation rate from 2012 applies, as well as the exchange rate from October 1, 2012.’ Thus, the President says that under these circumstances, there would be an increase by 8% of fuel price that will generally cause higher prices, a supplementary increase of the inflation rate, affecting the business environment which the Romanian Government claims to support.

Basescu also said that the amount the Government anticipates to get from the new tax on special constructions is underestimated, as the real amount would be, in fact close to 2 billion lei, instead of some 500 million lei. That extra money plus a 600 million lei surplus from the Ministry of Development would cover the amount obtained in case the excise duty on fuel would apply, he believes.

Traian Basescu continued his dispute with the Prime-Minister and the Government, saying that the money the Government plans to collect from the excise duty is allegedly meant to support the next year’s election campaign. In his turn, Victor Ponta, said that Basescu is not rational and that his decision of not approving the IMF memorandum is a clear proof of irresponsibility, a payback directed to both the Government and the Romanians that did not vote for him, according to Mediafax. He also announced that given the situation, basically, Romania does not have anymore an arrangement with IMF.