IMF Board might decide on Friday to release next two loan tranches to Romania

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The International Monetary Fund (IMF) Board of Directors will meet on Friday in order to review the Evaluation Report on Romania’s fulfillment of the Stand-by Agreement provisions.

If the Evaluation Report drafted by the mission visiting Bucharest on January 20- 27 and headed by Jeffrey Franks is approved, the third and the fourth loan tranches with a total value of 2.3 billion euros will be disbursed.
During a news conference held in Bucharest after the evaluation mission, Jeffrey Franks said he was satisfied with the results of the evaluation and talks with the Romanian authorities, stressing that he would recommend to the Board the conclusion of the evaluation report and, implicitly, the disbursement of the two tranches.

According to the IMF protocol, the loan is released and transferred to the beneficiary country in 48 hours since the approval of the Evaluation Report conclusion.
Half of the 2.3 billion euros will be sent to the National Bank of Romania in order to consolidate the foreign currency reserves, while the other half will go into the Public Finance Ministry accounts, in order to balance the budget deficit.

The Agreement Romania signed with the IMF in last May stipulates the granting of a loan totalling 12.9 billion euros, divided into eight tranches. So far, Romania has received the first two IMF loan tranches totalling 6.9 billion euros, as well as 1.5 billion euros from the five billion euros loan granted by the European Union. The EU is expected to transfer the second tranche worth one billion euros to Romania.

The Finance Minister Sebastian Vladescu has recently stated that starting this summer Romania might choose a different type of agreement with the IMF, namely a Precautionary Stand-by agreement. Mihai Tanasescu, special advisor and member of the IMF Board, pointed out ‘the discussion on the transition to a Precautionary-type agreement is a premature one and we could have an evaluation of such a decision in April or May 2010, when the next IMF mission comes to Bucharest.

The objective must be carefully analysed within the general context. In case a decision is made to replace the Stand-by with the Precautionary Stand-by agreement, this would represent a highly positive signal, considering that Romania will continue its reforms under an IMF program and will also bring evidence that it has overcome a difficult moment and can secure its own financing from the domestic and foreign markets. At the same time, such a decision would prove that Romania has a very strong commitment regarding the continuation of the reforms.’

In his turn, Tonny Lybek, the IMF representative for Romania and Bulgaria, told that is categorically possible that Romania would choose a Precautionary-type agreement and it was in Romanian authorities’ power to decide if they wanted to use the tranches approved by the IMF Board or not. As for the working procedures, Lybek said that the IMF would continue to send quarterly evaluation missions to Romania, even if a Precautionary-type agreement were decided upon.

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