“As the executive is embarking on a fiscal widening path ahead of next year’s elections, the lack of an IMF agreement is set to negatively impact RON assets. We believe the central bank will try to ‘fill in’ the IMF’s role to a certain extent by sounding alarm bells, but its influence is limited by the overall positive economic context, providing the government room for fiscal loosening,” ING Bank Romania said in a note to analysts and investors Wednesday.
Romanian president Klaus Iohannis met the IMF delegation Tuesday and discussions pointed to low chances of reaching a new agreement. The press release issued after the meeting expressed “serious doubts that Romania fulfills the conditions to benefit from a Flexible Credit Line”. It also mentioned that the previous accord ended in September without a favorable final appraisal, raising questions about the government’s commitment to adopt structural reforms.
ING Bank Romania said in a note last week the country is unlikely to secure a new agreement with the International Monetary Fund ahead of the elections in 2016, as planned by authorities, given the poor track record of reviews for the previous deal and the widening path of the 2016 budget gap.