“The authorities are on track to meet their fiscal targets for 2011. However, achieving the deficit target for 2012 remains challenging,” said David Lipton, First Deputy Managing Director and Acting Chair at the IMF.
Lipton said additional reforms in the health care system are required to secure financial stability. Moreover, faster progress is also needed to improve Romania’s capacity to absorb EU funds, while a deeper reform of state-owned companies is crucial to increase economic efficiency and boost growth.
The IMF Thursday completed the second review of Romania’s economic performance under the loan arrangement, enabling the disbursement of a new EUR495 million tranche.
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 over EUR1 billion under the new arrangement, but the authorities in Bucharest have not drawn any funds.
“Romania has made good progress under the new stand-by arrangement. Policy implementation has remained strong and all performance criteria were met,” Lipton said. “The authorities’ commitment to continued reform has helped restore market confidence and economic stability,” he added.
The IMF official said Romanian banking system remains liquid and well capitalized, but warned of downward risks due to international developments.
“Enhanced monitoring and detailed contingency plans… are needed to guard against possible contagion,” Lipton said.