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Romania seeks precautionary IMF, EU loan agreement

Romania seeks precautionary IMF, EU loan agreement

Romania will seek a (EURO)5 billion ($6.82 billion) precautionary loan from the International Monetary Fund and the European Union this spring, the country's central bank governor said Monday.
The current two-year bailout agreement with the IMF, the EU and the World Bank ends this year.
Mugur Isarescu said Romania will use the money only in case of emergency and unexpected events that could lead to a drop in the bank's reserves or that could prevent the authorities to finance the budget deficit. He said the IMF will make available (EURO)3.6 billion ($4.91 billion) and the EU (EURO)1.4 billion ($1.91 billion).
President Traian Basescu said Sunday Romania would no longer take the last (EURO)1 billion ($1.36 billion) installment of a (EURO)20 billion (US$27.26 billion) IMF-led loan from 2009, adding the economic situation has improved. The economy is expected to grow by 1.5 percent in 2011. However, Basescu said the country still needed a safety net for emergencies that could appear in the next two years.
Isarescu said the central bank's reserves are strong and as a result the last IMF installment is no longer needed.
But the country will still take the last installment from the EU, worth (EURO)1.35 billion.
Romania signed the agreement for the IMF-led loan in 2009, when its economy dropped by 7.1 percent. Last year, authorities took tough austerity measures, slashing public sector wages by one-fourth and raising the sales tax from 19 percent to 24 percent, to keep the bailout agreement.
Isarescu said the inflation doubled in 2010, as a result of the sales tax hike, but is expected to drop to 3.6 percent by the end of 2011. Yearly inflation stood at 7.96 percent in December 2010.
Isarescu also said the bank decided to keep its benchmark interest rate at 6.25 percent.


Updated : 2021-10-27 17:59 GMT+08:00