“Under the authorities’ economic programs supported by the last two stand-by arrangements with the IMF, Romania has reduced large external and fiscal imbalances and begun structural reforms in a variety of areas,” Nemat Shafik, IMF First Deputy Managing Director and Acting Chair said in a statement Friday.
“However, real GDP has yet to return to its pre-crisis level, the economy is still vulnerable to external shocks, including volatile capital flows, and the reform agenda remains unfinished.”
Shafik said the new loan agreement is expected to support policy continuity in Romania, provide a reserve buffer, and catalyze growth-enhancing reforms.
“It will also put Romania on the path toward exiting from IMF support.”
The authorities in Bucharest will treat the new deal as precautionary, meaning they do not plan to draw on the available funds. The loan agreement will be signed for a period of two years.
“The new stand-by arrangement will support our comprehensive economic program for 2013–15 to maintain sound macroeconomic policies and financial sector stability, and continue structural reforms in an environment of significant external uncertainties,” Romania said in its application sent to the IMF.
The European nation plans to borrow another EUR2 billion from the European Union, as well as EUR1 billion from the World Bank, pending approval from the institutions’ boards.
Romania and the IMF have signed a two-year EUR3.6 billion loan agreement in 2011, following the completion of a larger EUR13 billion deal secured in 2009. The agreement was supplemented by a EUR1.4 billion loan from the European Union and another EUR1 billion from the World Bank. The country has not drawn any funds under the second program.