IMF, EU grant Romania five-billion-euro credit line First Published: 07/02/2011 16:53
Romania will get a fresh credit line of five billion euros ($6.8 billion dollars) from the IMF and the EU after an emergency loan helped the country exit the crisis, president Traian Basescu said Sunday.
"It will be a two-year, precautionary-type agreement," Basescu said in a public address.
"Under this deal, the IMF and the EU will place at Romania's disposal five billion euros" to be drawn only in case of emergency, he added.
"A debt crisis is underway (in Europe) and we don't know how the situation in other states may evolve," Basescu explained.
He stressed that the two-year agreement concluded by Romania in 2009 and due to expire in April had ended successfully.
"The economy has been stabilised and the necessary measures have been taken to emerge from the crisis," he added.
"The conditions to return to economic growth have been created. Romania's economy is out of the crisis.", he insisted.
After severe recession in 2009 and 2010, the Romanian economy is expected to grow by 1.5 percent in 2011.
The public deficit, which stood at 7.1 percent of gross domestic product in 2009, was trimmed to 6.6 percent last year, and is expected to be cut to 4.5 percent in 2011.
Basescu added that Romania no longer needed to draw the last instalment, worth one billion euros, from the IMF, as the central bank had consolidated its currency reserves and the banking system was solid enough.
In May 2009, long before countries like Greece or Ireland, crisis-hit Romania had obtained a two-year 20-billion-euro lifeline from the IMF, the EU and the World Bank in exchange for key reforms aimed at slashing public spending.
In July 2010, the government axed public-sector wages by 25 percent and raised the VAT tax on goods and services from 19 to 24 percent.
The number of civil servants was also reduced by 100,000, to stand at 1.27 million.
"Those were painful measures that we adopted unwillingly," Basescu said.
"But they helped us keep the economy on track," he stressed.
The new agreement should get the IMF board's green light on March 23 and come into force in April.
Under it, Romania pledges to strengthen its economy by developing such key sectors as energy and transportation. It also promises to make better use of funds worth some 30 billion euros made available by the EU until 2013.
"This could increase the economic growth forecast by one or two additional percentage points," Basescu explained, citing international studies.
He stressed that Romania would also go ahead with the education and health reforms, consolidate the implementation of the public-sector wage and pension bills adopted last year and continue to fight against corruption.
An IMF mission started a visit to the country on January 25 to discuss recent reforms, the country's economic performance and the possibility of a new agreement.
They have been meeting government officials, union leaders and members of the business and banking community during their time here, a mission that is due to end on Tuesday.