By Daniel Stroe – Bucharest
The International Monetary Fund (IMF) yesterday approved the first and the second evaluation of the stand-by agreement signed with Romania after its delegation concluded that the country’s current account deficit has decreased significantly and the economy has reached its highest since the crisis struck a few years ago, while inflation dropped to the lowest levels in the post-communist period.
By green-lighting the two evaluations, IMF releases another 436 million euros. “Romania is making good progress within the stand-by preventive agreement. The economic growth has reached the highest level of the post-crisis period in 2013, the current account deficit has been significantly reduced while inflation has decreased to a historic low. Despite these, the economy and the financial sector remain vulnerable to shocks”, warned David Lipton, first deputy director of the IMF.
He also underlined that among the priorities for 2014 are the improvement of capital expenses, better collection of taxes and the implementation of an expenses control system, while urging supplementary actions amid efforts to reform the health system and measures meant to protect poor families from the energy cost increase.
Lipton also recommended the consolidation of the monetary policy transmission and, as concerns the banking system, which remains well capitalized, the state has yet to settle the bad debts issue. Structural reforms have also evolved in the energy and transport sector, the IMF official added. Overall, Romania has met the objectives of the program, but steps made amid structural reforms are unequal and vulnerabilities still persists, Lipton concluded.
In return, the Romanian government assumed, the second semester of 2014, to run a pilot project, which consists of nation-wide inspections in search of undeclared employment and fiscal evasion. It also said it would privatize the state owned rail freight operator CFR Marfa, after a failed attempt last year.
Romania foresees an economic growth of 2.2 – 2.5% this year, after a 2.8% last year. A budget deficit of 2.2% is also estimated for 2014. The country is currently under a 4 billion euros agreement with IMF and EU, but the government doesn’t intend to use the money. The very objective of the agreement is to protect Romania from possible shocks on financial markets and reduce loan costs.
Over the past four years, Romania has wrapped up two agreements with the IMF, EU and the World Bank amounting to 20 billion and 5 billion euros respectively . The second one, signed in 2011, but finalized last year, mainly had a preventive role so the government did not use the money.