Press statement made by IMF mission chief for Romania
28.03.2002
INTERNATIONAL MONETARY FUND
Office of the Resident Representative in Romania
National Bank of Romania, 25, Lipscani Street, Bucharest
Fax # (401) 312-0788 Tel # (401) 315-5026 Website: www.fmi.ro
PRESS STATEMENT
The IMF mission chief for Romania, Mr. Neven Mates, announced today that the mission and the Romanian authorities reached an agreement on the supplementary letter of intent on the completion of the first and second reviews under the stand-by arrangement that was approved by the IMF Board on October 31, 2001. Subject to the approval of IMF management and the completion of prior actions, the meeting of the Board could take place in late May.
The mission noted with satisfaction that macroeconomic developments have been favorable and broadly in line with the program. Inflation continued to abate significantly in the last quarter of 2001 and in early 2002, while the government is making substantial efforts to adjust administered prices. GDP growth was higher than targeted in 2001, notwithstanding the weaker import demand of Romania’s trading partners. The current account deficit in 2001 exceeded only slightly the program target, but the outcome of the trade balance for the first two months of 2002 augurs well for this year’s target.
As evidenced by the conduct of the monetary and budget policies, the Government has been committed to keep the program on track. The budget target for 2001 was met, and the budget deficit was contained at a low level in January and February. Monetary policy targets have been met with a comfortable margin.
Discussions with the authorities in the context of the reviews focused on areas where program objectives were not fully achieved, such as reducing losses in the energy sector, keeping the wage policy in the state-owned companies within the targeted ceiling, and accelerating privatization. In this context, the staff and the authorities reached agreement on additional measures.
In the energy sector, losses are expected to be reduced through the continuation of the adjustment of administered prices and stronger measures to improve the collection rates. In particular, the policies of enforcing payments with respect to large industrial users and municipal heating companies with weak payment record to utilities will be toughened in the coming months. Moreover, the government will implement structural changes, such as the privatization of distribution companies and the transfer of Termolectrica’s heating units to the local governments.