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Isarescu: Impossible to conclude an arrangement with IMF this year
Romania concluding a stand-by arrangement with the International Monetary Fund (IMF) this year is impossible, Governor of the National Bank of Romania (BNR) Mugur Isarescu said Tuesday.
"In Romania, when you say 'agreement with international financial institutions' people will assume it is an 'agreement with the Fund' and a conditional one as well. This August, they will come to discuss Article IV [IMF delegation]. They will put forth recommendations. A new, stand-by arrangement with the IMF is impossible to be concluded this year for two reasons: Romania has a very small foreign payments deficit, of below 1 percent. Just imagine going to the Fund and say 'Sir, I have a problem.' 'What is it?' 'I have an external problem, I fear a crisis.' 'Hold on! Your deficit is 1 percent. There is a country over there with a 14-percent current account deficit [Brazil],' the same as we did in 2008. The second reason making the arrangement difficult is the manner in which the previous similar arrangement ended," Isarescu told a news conference where he released the latest BNR quarterly inflation report.
Isarescu said the IMF has not forgotten about what happened in 2015.
"I do not expect the Fund to come here and say: 'We have forgotten about what happened in 2015.' The conversation resumes from 2014-2015: 'What did you fail to accomplish? Why was it so? Let us see the situation now.' The atmosphere in the country is different now. There is an inflamed public opinion because those gentlemen dared pontificate on legislative initiatives. We would drown ourselves in ridicule by claiming that they have plotted together a conspiracy," Isarescu explained.
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The National Bank of Romania (BNR) is more concerned with decreasing productivity than with the trend of nominal gross salary in industry, BNR Governor's Mugur Isarescu told a Tuesday's press conference.
"There is a wide gap [between productivity and salaries]. Unfortunately, we are more concerned with decreasing productivity than with the trend of nominal gross salary in industry. It does not look good at all," Isarescu said.
He does not think that the rise in private and public sector salaries can be stopped easily.
"The best indicator is the market factor. In the private sector, the salary rise increases costs that can no longer be covered by prices. The market price no longer allows it. On the other hand, public sector salaries have risen not in line with the fiscal deficit and the salary share in total budget expenditures," the BNR governor added.
He also said that the BNR looks at available income, which is the essential element taken into account by any banker.
"The available income is for us the central element that is taken into account by any serious banker. The money left in the individual's pocket because they live on it, from it they pay back. How much is left after paying the things that cannot be avoided: taxes, electricity bill, rent or the home loan repayment if they have to repay a long-term home loan," said Isarescu.