Jeffrey Franks reiterates IMF flexibility towards Romania
Therefore, during the talks held by the IMF delegation at the Public Finances Ministry (MFP) on Wednesday, Jeffrey Franks, who heads of the IMF evaluators’ mission visiting Bucharest by Aug. 10, stressed the National Bank of Romania cannot directly fund the Romanian budget deficit by purchasing government bonds from the MFP directly.
Franks added that no European central bank can get involved in financing a country’s budget deficit.
The IMF official reiterated that the international lender will have a flexible attitude towards Romania as well as towards other states in the region that have contracted IMF loans, given the condition the regional economy is in.
In Tuesday’s talks with the leading officials of the Romanian Businessmen’s Association, the IMF representatives said they were concerned with the situation, given that a simulation had been carried out that showed the revenues will drop 17 billion lei (roughly 4 billion euros) in Romania in 2009.
Therefore, they confirmed they will discuss a review of the budget deficit, but only if the Government gives assurance it will take steps to curb the expenditure.
SME Minister Constantin Nita told the ruling Social Democrats back up the idea of a wider budget gap ‘if investment goes up, with the priority areas being the housing building and the infrastructure, namely the motorway building’.
The reason why the IMF is considering a flexible attitude was explained by Tonny Lybek, the chief of the IMF Office for Romania and Bulgaria, who told that on the basis of the information they had in March, they pledged to support Romania’s economic programme with a real drop of the GDP at minus 4.1 percent in 2009, to keep steady at an average 0 percent in 2010, but they anticipated an activity re-launch in the second part of 2010.
Lybek added the IMF is now closely monitoring the situation and – if factors outside the control exercised by the Romanian authorities call for it – the IMF will adjust the macroeconomic framework during the regular evaluation mission in early August.