Romania and the International Monetary Fund have reached an agreement at the experts' level and the results of the discussions were good, according to Jeffrey Franks, head of the IMF mission to Romania (in picture, right). The fund expects to ask for the IMF's board approval mid-January, to unlock a new loan tranche for Romania – around EUR 900 million.

Negotiations for a new agreement with the IMF will start in January- February when the IMF mission will return to the country.

The IMF expects Romania to see slight economic drop in the third quarter of the year, due to certain measures, but expects a positive growth in the fourth quarter, as well as a reversal of the negative tendency in the first part of next year, according to Franks.

“We will collaborate with the Romanian Parliament on the Emergency Ordinance 50/2010 to have a transparent enforcement of the law and no destabilization to the financial system. However, the Romanian Central Bank (BNR) is the main decision maker which regulates the banks' activity in Romania,” said Istavn Szekely of the EC.

THe EC has sent a pre-infringement letter to Romania on the OUG 50/2010. "When a pre-infringement letter is sent, this means there's a risk to start the infringement procedures," said  Szekely, the EC representative in the team which has reviewed Romania's development.

"There have been unclear banking practices, even abusive, we are aware of this," said Franks.  "We support the implementation of transparency in what concerns the emergency ordinance 50/2010 but this needs to ensure also the stabilization of the banking system, he went on. " We want to keep the balance between necessary improvements in the banking area and make sure there is nothing that will endanger the stability of the financial system. I am optimistic that a resolution that supports both objectives will be found," Franks said when asked whether the changes to the ordinance 50 are a pre-condition to Romania receiving the next loan tranche.

The authority on how the banking system works in Romania should be in the hands of the Romanian Central Bank, not the Agency for Consumer Protection or any other body, said Franks. "The specific authority to shutdown lending activity is the Central Bank," said Franks. 'We are supporting the National Consumer Protection activity and it is normal for it to deal with abusive bank practices," he continued.

There are several steps Romania still has to make before receiving more money, among which reforming pensions and changing the public system salaries.

There have been certain challenges in the negotiations between Romania and the IMF, one of them being the state's debt towards companies. Although a big chunk of this debt was paid in September, there still is pressure, especially from the health care system, said Franks.

editor@romania-insider.com