Romania wins final approval from IMF for financing

12:44, 23 April 2009
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Romania will receive a 13 billion-euro ($17 billion) loan

The International Monetary Fund approved terms of a 13 billion-euro ($17 billion) loan to Romania with no changes from last month’s agreement, Romania’s Finance Ministry said, Bloomberg reported.

The loan, part of a 20 billion-euro package, will start to arrive in tranches over two years as soon as Romanian officials sign the contract, Finance Minister Gheorghe Pogea told newswire Mediafax today. The comments were confirmed by Pogea spokeswoman Dana Daraban by telephone.

“We agree on the sums, the terms and the conditions so now each side can get to work,” Pogea told Mediafax. He said the government will meet late Thursday to discuss the formal IMF loan offer, which he said arrived late Wednesday.

The loan brings to more than $60 billion the total handed out to eastern Europe as the region’s economies suffer from the global credit crunch and waning demand for exports. Hungary, Ukraine, Belarus, Latvia and Serbia have also sought bailouts to prevent defaults and aid banks.

The Romanian package, which includes 5 billion euros from the European Union and about 1 billion euros each from the World Bank and the European Bank for Reconstruction and Development, is meant to cover Romania’s budget and current-account deficits.

Under conditions of the two-year loan package, 13 billion euros will go to the central bank’s foreign exchange reserves, while the rest will cover the budget deficit or be spent on infrastructure investments.

The loan negotiations were based on an IMF prediction that Romania’s economy will shrink by as much as 4 percent this year, after growing 7.1 percent last year, the fastest pace in the EU. The agreement also requires the Romanian government to target a budget deficit of 4.6 percent of gross domestic product this year, from a gap of 4.8 percent of GDP last year.


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