An International Monetary Fund (IMF) mission headed by Erik de Vrijer will be in Bucharest between November 6 and 14, but the seventh review of Romania's standby arrangement has been postponed until after the December 9 elections. Expect typical IMF fare: discussions with the Romanian authorities on recent economic developments, the economic outlook, monetary and fiscal policy and structural reforms. IMF representative for Romania and Bulgaria Tonny Lybeck announced the visit today (October 16 ) and added that the IMF mission would again be joined by representatives from the European Commission and the World Bank.

The IMF completed the sixth review of Romanian's standby arrangement and approved the release of the latest chunk of funds at the end of September, releasing a further sum of just under EUR 513 million. According to the IMF, the Romanian authorities indicated that they did not intend to draw on the cash, maintaining the policy of treating the stand by arrangement as a precautionary funding line.

The IMF again recognized the efforts made by Romania to control spending and play by the Fund's rules in a difficult economic context. But the IMF's conclusion was far from a pat on the back for Romania; the performance criteria for government and social security domestic arrears and net foreign assets of Romania's central bank (BNR) were not met. In the first case the IMF waived the target, while the criterion for foreign assets was modified.

Last time around, the IMF made a number of recommendations – Romania must make an effort to reduce arrears and the IMF again repeated its reform mantra: “Additional efforts are needed to improve tax administration and reform the health care, energy and transportation sectors.” The Romanian authorities must also “step up” the liberalization of energy prices. On the health of Romania's banking sector, the IMF was positive, saying buffers were in place to deal with non-performing loans and possible spillovers from Europe and the eurozone. But the IMF advises “vigilance” and a beefing up of the banking sector's financial safety net, along with further “contingency planning.” Excessive interference to prop up Romania's currency is discouraged, with the IMF recommending that support is “limited to smoothing exchange rate volatility.” Growth will slow and inflation is reaching the upper limit of the BNR's target range, the IMF also warned.

The disbursement brought the total available to Romania to around EUR 3.2 billion. In March 2011, the IMF approved a 24 month standby arrangement with Romania for approximately EUR 3.7 billion.

Liam Lever, liam@romania-insider.com