Press notice of Office of the Resident Representative in Romania of International Monetary Fund
20.02.2003
An IMF mission visited Bucharest February 10-20 for discussions on the third review of the stand-by arrangement, and reached understanding on a supplementary letter of intent.
Romania continues to make encouraging progress. Inflation has fallen faster than we hadexpected, the external accounts have strengthened, and output growth is robust. Romania’s export performance has been particularly impressive.
We strongly support the government’s determination to build on this momentum to accelerate the structural reforms necessary for completing the transition to a market economy.
Efforts to strengthen public enterprise wage policy will be crucial to sustain disinflation. Wage settlements earlier this year appear to have been in excess of what can be economically justified, and will have to be monitored closely to contain inflationary pressures and ensure that gains in competitiveness are not eroded.
The mission attaches particular importance to the government’s commitment to address weak financial discipline in large loss making public enterprises, which continues to be a drain on the country’s scarce resources, and to step up its privatisation program. Decisive action in this area will go a long way to improve the financial results of the energy sector, reduce quasi-fiscal deficits and further strengthen market discipline.
An important element of our discussions with the authorities has been how to strengthen the heating support scheme to offset the impact on low income households as heating tariffs are raised to cost recovery levels.
The mission welcomes the government’s decision to proceed with discussions with the EBRD and IFC on relaunching the privatisation process for BCR.
Subject to management approval and the successful implementation of agreed measures, we expect that Board discussion of the review will take place in the second half of April.