Romania's new arrangement with the IMF approved by the fund's Executive Board

The Executive Board of the International Monetary Fund (IMF) approved a new 2-year Stand-By Arrangement (SBA) with Romania based on the cover letter sent by the Romanian authorities. According to them, the arrangement of approximately EUR2 billion will be treated as precautionary, therefore there's no plan to draw under it, unless there is an extraordinary situation. Romania has also requested a precautionary support from the European Union of EUR2 billion as per an IFM press release.

'This time, a Stand-by Arrangement is really a security arrangement. In case something that might negatively affect us happens in the world economy, we will have then the possibility of drawing some money that do not cost very much, so the agreement is very welcome.' said Romania's Minister of Labour, Mariana Campeanu during the Bucharest Forum 2013.

Florin Georgescu, First Deputy Governor at Romania's Central Bank also welcomes this arrangement that ensures predictability, transparency and stability in the business environment, as well as decisions transparency in public sector, even though Romania still has some issues that should be internally solved: 'Upon the last two agreements with IFM we successfully met, here we managed to get approved a new precautionary agreement that provides credibility for Romania in international economic relations, predictability, transparency and stability in the business environment, because a program with such international partners like EU, IFM and the World Bank offer trust preconditions to investors, stability to business area and transparency within the public sector decisions. (…) An arrangement with these international partners offers credibility and confirms the business environment that 'Indeed, Romania is on the good path, coming to revisions quarterly, meeting the fiscal, monetary, structural reform parameters, you're on the right way, go on buying shares in X company, participate in further privatization processes!'

While in the last two arrangements Romania had with IFM fiscal and large current account imbalances have been reduced and there have been initiated structural reforms in several fields, this new arrangement might put Romania on the path toward exiting from the IFM support says Nemat Shafik, First Deputy Managing Director and Acting Chair at IFM: 'Under the authorities’ economic programs supported by the last two SBAs with the Fund, Romania has reduced large external and fiscal imbalances and begun structural reforms in a variety of areas.(...) The new SBA will support policy continuity, provide a reserve buffer, and catalyze growth-enhancing reforms. It will also put Romania on the path toward exiting from Fund support.'

IFM supports Romania's plans based on the commitments already taken, recommending the Romanian authorities to stick on their plans to reduce the budget deficit, to follow the reform agenda which remained unfinished and to bring the governance structure at the non-bank financial supervisor in line with international standards, among others.