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IMF delegation visiting Bucharest to survey precautionary deal with Romania
An International Monetary Fund (IMF) mission will visit Bucharest over Jan. 21-Feb. 5 for talks relating the first and second survey of a 2-year, 2 billion euro precautionary deal it closed with Romania, that was approved on Sept. 27, 2013.
The IMF mission with discuss with the Romanian authorities the recent economic developments and the priorities of the economic reforms so as to attain the 2014 budget deficit target.
The conclusions of the last IMF delegation pointed to a deeper disinflation than it had been anticipated, with an inflation projection for 2013 at 2 percent. The last official results showed a year-over-year inflation rate close to 1.6 percent in 2013, on the lower limit of the Central Bank target.
During the last talks with the IMF mission in 2013, the Romanian Government announced a key measure aimed to meet the 2014 budget deficit target, namely an increase in the fuel excise tax and the taxation of special buildings. However, President Traian Basescu signed the 2014 state budget into law at end-Dec. only after the executive had agreed to delay the enforcement of the hiked diesel- and petrol excise tax by three months.
The conclusions of the last IMF visit paid in Nov. 2013 that were unveiled by new IMF Mission Chief in Romania Andrea Schaechter showed the 2013 budget deficit target was set at 2.5 percent of GDP, a 0.2 percent increase in cash terms aimed to cover the greater co-funding needs relating a faster absorption of the European Union funds. Schaechter stressed the authorities in 2014 plan to continue curbing the deficit in accordance with the fulfilment of the medium-term budget objective of having 1 percent structural deficit in 2015 (according to ESA methods), leaving room for the further increase in the co-funding related spending.
Following the autumn negotiations, the Public Finances Minister Daniel Chitoiu announced index-linking of the pensions by 3.76 percent from Jan. 2014 and a rise in the minimum wage up to 850 lei from Jan. 1 and up to 900 lei from July 1.
The financial aid granted by the IMF to Romania has materialised in ten stand-by arrangements since 1991 up until now. The current precautionary deal is the third accord requested by Romania to the international lender since the outbreak of the economic crisis. At the same time with the new deal, Bucharest also requested the European Union two billion euros in financial support.