Bucharest, 24 April 1997 (RFE/RL) - Romania's new economic reform program has received its first mark of international recognition -- the International Monetary Fund has approved a $430 million standby loan to that country.
Formal announcements were made in Washington and Bucharest yesterday. The first tranche of the loan consists of $86.2 million, and delivery of the remainder in installments depends upon continued progress in reforms.
Romanian Prime Minister, Victor Ciorbea, at a government briefing, said that the approval of the stand-by agreement is seen by his government as a normalization of the relationship between Romania and the international financial institutions. The IMF decision, said Ciorbea, certifies that the economical reforms initiated by the Romanian government are on the right track.
With evident satisfaction, Ciorbea added that in this difficult period, "Romania has proven itself a credible country, with a coherent governing program and a people eager to carry out the reform, even if its price remains high".
But the prime minister added that Romania is not able to bear alone the reform costs from its own resources, and therefore needs the help of the international financial institutions.
The IMF loan approval was also seen by Ciorbea as "the green light expected by foreign investors". He added that after the IMF decision became known on the international capital markets the interest rates for the state bonds issued by Romania declined spectacularly.
RFE/RL's economic correspondent reports that earlier in the day, the IMF representative in Romania, John Hill, issued a statement saying that the IMF Board approved the new stand-by loan for release over a 13 month period. The first installment of $86.2 million was made available immediately. The other four installments are to be issued quarterly, after reviews of some performance criteria and of the exchange rate policies.
The IMF communiqu� announced also the deadline for two extensive reviews of the implementation of the Romanian reform program -- August 15, 1997, and February 15, 1998.
The Romanian government committed himself, under the agreement terms, to reduce the monthly inflation rate in the second half of this year to around two per cent, to reduce the current account deficit to $1,4 billion, in 1997, from $2,3 billion in 1996, and also to increase the currency reserves of the banking system.
Noting the low inflation goals, our correspondent recalls that Romania recorded in March a monthly inflation rate of more than 30 percent, its highest rate in seven years. Also, the inflation for the first three months of 1997 was 76 percent, a record for a quarterly period in post-communist Romania. The government has predicted an inflation of 90 percent for 1997.
Our correspondent says that to realize the objectives mentioned in the agreement with IMF, the Romanian government pledged to accelerate the reforms in the industrial and agricultural sectors, in order to reduce the huge losses already registered there.
Other points to be reviewed by the IMF Board for the delivery of the next installments are: a pledge to reduce the budgetary deficit to 4.5 percent of GDP in 1997, a tight monetary policy, a free currency market, a flexible exchange rate, price liberalization1s and a tightening of financial discipline.
Referring to these last points, the Romanian finance minister, Mircea Ciumara, said that with the money from IMF, Romania has now all the needed financial resources to observe the reform budget, approved last week by the parliament.
The present stand-by loan agreement is the fifth between Romania and IMF since 1990. The previous four collapsed, under the post-communist leftist governments, for lack of reforms.