In September last year, Romania and the IMF signed a EUR1.98 billion two-year precautionary loan program, the third financial package the eastern European country has received in the last four years.
“Romania is making good progress under the precautionary stand-by arrangement. Economic growth reached a post-crisis high in 2013, the current account narrowed significantly, and inflation has fallen to historic lows,” said David Lipton, IMF Deputy Managing Director and Acting Chair.
However, the country’s economy and financial sector remain vulnerable to shocks.
“Steadfast program implementation is essential to preserve macroeconomic stability and policy buffers in this election year,” Lipton said.
He said the authorities in Bucharest should take additional steps to improve capital spending and revenue collection, as well as to reform the healthcare sector and shield vulnerable social categories from deregulated energy prices.
“Efforts are needed to strengthen monetary policy transmission. The banking system remains well capitalized, but the authorities need to accelerate the resolution of non-performing loans and closely monitor risks from parent bank deleveraging. The non-bank financial regulator needs to be reformed in line with best international practices,” IMF said.
The IMF also approved a waiver for the nonobservance of the performance criterion on the general government overall fiscal balance, which was missed by a small margin, and modifications to program conditionality.
Moreover, the international creditor approved Romania’s request to add a review based on end-June 2014 performance and discussed an ex-post evaluation of the country’s previous standby agreement that ended in the summer of 2013.
“The ex-post evaluation concluded that the program objectives were largely met, although progress on structural reforms was uneven and vulnerabilities remain,” IMF said.