The International Monetary Fund (IMF), which completed the third review of Romania’s economic performance, will disburse an additional EUR 507 million for the country, bringing the total resources that are currently available to Romania to EUR 1.6 billion.

While acknowledging Romania's progress and that all targets within the program were met, the fund warns that risks have risen considerably due to the financial turbulence in the eurozone. “Continued commitment to the economic reform agenda is crucial to help withstand current uncertainties,” said David Lipton, IMF First Deputy Managing Director and Acting Chair.

The authorities are on track to meet their fiscal targets for 2011, and their 2012 budget should bring the deficit well below 3 percent of GDP next year, according to the IMF statement. The IMF officials highlight the unpopular plans to address the chronic financial problems in the healthcare sector and to improve tax administration, but continue to criticize the low absorption of EU funds.

The Romanian banking system is another area where problems might arise. “The focus should be on enhanced monitoring and detailed contingency plans—including procedures for using the newly enhanced bank resolution powers — to guard against possible contagion. While inflation has dropped sharply, monetary policy should remain cautious given current uncertainties,” the statement concludes.

The new stand-by agreement for Romania was approved in March last year, for some EUR 3.6 billion. The new deal superseded a EUR 13 billion deal between the country and the IMF and other international financial institutions.

editor@romania-insider.com

(photo source: IMF)