“Romania has made good progress… and all program targets were met. Economic growth has resumed while inflation has fallen. However, risks have risen considerably due to the financial turbulence in the euro area,” said David Lipton, First Deputy Managing Director and Acting Chair of the IMF.
Lipton said continued commitment of the authorities in Bucharest to the economic agenda “is crucial” to withstand current uncertainties.
The IMF on Monday completed the third review of Romania’s economic performance under the EUR3.6 billion precautionary loan program, enabling the disbursement of a new EUR507 million tranche.
Romanian authorities “have indicated that they will continue treating the arrangement as precautionary and therefore do not intend to draw under it,” the IMF said in a statement.
In March, Romania and the IMF signed a two-year precautionary loan agreement, successor to a EUR20 billion bailout package received during 2009-2011. The new deal also includes EUR1.4 billion financing from the European Union and a EUR400 loan from the World Bank.
So far, the IMF approved total financing to Romania worth around EUR1.6 billion under the new arrangement, but the authorities in Bucharest have not drawn any funds.
The eastern European country still faces challenges in a few key economic and social sectors, including healthcare and EU fund absorption, while the external environment creates additional risks in the banking system and warrants strong supervisory surveillance, Lipton said.
“The focus should be on enhanced monitoring and detailed contingency plans-including procedures for using the newly enhanced bank resolution powers-to guard against possible contagion,” he added.
Furthermore, although the annual inflation rate has fallen significantly, the central bank should maintain a cautious approach to its mon