Increased European Union funds absorption and improved capital spending are key priorities for Romania while additional action is required to reform the health care sector and to improve weak tax administration, according to Nemat Shafik (in picture), Deputy Managing Director and Acting Chair of the International Monetary Fund (IMF), which recently completed the fourth review under the stand-by agreement for Romania.

Romania has EUR 500 million available for disbursement, bringing the total resources that are currently available to the country at about EUR 2 billion. The stand-by agreement stays at a total of EUR 3.6 billion and was approved a year ago. The country however does not intend to draw any money, as it continues to consider the deal as precautionary.

“The authorities remain firmly committed to their 2012 budget deficit target of well below 3 percent of GDP. Continued strict spending discipline is needed to achieve the target. […] Structural reforms of State-Owned Enterprises have progressed, but faster implementation of restructuring efforts and enhanced regulation and market-oriented pricing in the energy and transport sectors will be essential to reduce arrears, improve economic efficiency, and boost growth,” said Nemat Shafik.

Romania still has some risks in the banking system due to high non performing loans and potential financial spillovers from elsewhere in Europe, but it also has enough capital buffers to cushion the impact of any shocks, according to the IMF. The fund advises supervisory vigilance, quick contingency plans, while asking authorities to be cautious in further monetary easing, on risks for currency weakening.

The Romanian currency RON reached its lowest rate against the EUR this week, at a rate of RON 4.3794 at the beginning of the week, its historic low so far.

editor@romania-insider.com

(photo source: IMF)