Jeffrey Franks: IMF to show flexibility, within certain limits
Bucharest officials, that also include Minister of Economy Adriean Videanu, had declared before that the budget deficit might broaden to 7 percent of the GDP, but that it is important that the raised amounts are assigned for investments in infrastructure, not for consumption.
In a recent exclusive statement, Tonny Lybek, head of the IMF Regional Office for Romania and Bulgaria, had told, among others, that: ‘The decrease in Romania’s GDP in real terms in Q1 of the current year (-6.2 percent) was steeper than we (the IMF – Ed. Note) had anticipated in March.
However, quite a number of states saw their GDP going down in Q1 and in times of serious recession, is not unusual for the GDP to take a steeper plunge at the beginning, to than follow a milder downward trend.
Based on information available in March, the IMF pledged to support Romania’s economic program for a -4.1 percent real decrease in the GDP in 2009 and a stagnation thereof (average 0 percent) in 2010, yet we projected a re-launch of activity in the second half of 2010.
The IMF is now closely monitoring the situation and, if factors out of the Romanian authorities’ control require it, we will adjust the macroeconomic framework during the ordinary assessment mission scheduled for early August.’
Minister of Public Finance Gheorghe Pogea estimates that the economy will further contract in the second half of the year, calling for an increase of the budget deficit.
Ovidiu Nicolescu, the president of the National Council of Private Small and Medium-sized Enterprises in Romania, considers that maintaining the budget deficit at the current level could drive Romania into payment incapacity.
During the current negotiations with the IMF, Romania has an easier position due to its ability to meet the commitments undertaken under the Stand-by Agreement, until mid-year.
In this regard, Prime Minister Emil Boc told ‘Romania’ radio station ‘that in the first 6 months of 2009, Romania kept within the established deficit targets, that were implicitly negotiated with the EC and the IMF.
For a deficit target of 2.73, we are at 2.70, that is our spending has been exactly as spelled out in the budget law. This means that Romania honors its international obligations, and that in this regard we have our commitment fulfilled.