Jeffrey Franks: IMF examines budget deficit target for 2010
Date: 27-07-2010
IMF will revise the GDP drop estimate for this year of 0.5%, IMF Romania chief of mission Jeffrey Franks declared on Monday who considers that the EBRD estimate of -3% for GDP drop is pessimistic In its June forecast, the IMF said Romanian economy is expected to stagnate or decline by 0.5% this year, from a 7.1% contraction a year earlier.Joint teams from the IMF and the European Union arrived in Bucharest earlier Monday for the fifth review of Romania's EUR20 billion aid package signed in 2009.
The delegation of the International Monetary Fund, headed by chief of the mission for Romania Jeffrey Franks, will examine, together with the managers of the Ministry of Public Finance, the budget deficit target for 2010, said Jeffrey Franks on Monday. We are going to examine the budget deficit target with the Ministry of Public Finance and study the situation of the budget deficit in Romania in the current context, said Franks, who appreciated that it would be premature to comment on maintaining the current budget deficit target.
The chief of the IMF mission does not see any danger for Romania to suspend its negotiations with the Fund because of the austerity measures that must be taken in order to accomplish the financial adjustment. The situation of the reforms in Romania must be examined, in Jeffrey Franks' opinion, as part of the measures taken at the beginning of the support programme for Romania. Considerable progress has been made since the beginning of the programme, but the pension reform must be made more dynamic, as it has lagged behind for a few months, and one must make up for the delay in applying the laws on unitary pay, said the chief of the IMF mission for Romania.
If the policies applied by the Government lead to achieving the budget deficit that was established, it is nothing negative in the fact that the Government had to switch from one package of policies to another. There are social disadvantages in cutting pensions, but there are advantages in cutting them from the point of view of cutting budget spending, but there are also disadvantages in the VAT increase, said Jeffrey Franks, who emphasized the fact that question was if they achieved or not the adjustment necessary for regenerating the confidence in Romanian economy.
The mission headed by Jeffrey Franks in the days to come will revise the macroeconomic prognosis and will make a new estimate following the talks with the Romanian analysts, with the Prognosis Commission and the National Bank of Romania (BNR) in order to establish the parameters of the new prognosis of Romania's economic development.
In my opinion, the EBRD prognosis, the 3% decrease in the GDP in 2010, is too pessimistic and I am not so pessimistic, said Jeffrey Franks. According to Agerpres, the chief of the IMF mission said that he expected to have positive talks with the interlocutors he will meet in the next ten days in Romania. I see no danger for Romania to go as far as suspending its negotiations with the IMF because of the austerity measures, which some people consider to be too harsh, he said.
As for the talks Jeffrey Franks and the mission headed by him will have this afternoon with BNR Governor Mugur Isarescu, Jeffrey Franks explained that the meeting with the Governor took place at the beginning of all missions in order to discuss the situation in the entire economy, in order to examine the monetary and fiscal policies and the situation in the financial and fiscal fields. We shall have to work with the Romanian authorities with a view to guiding Romania to the right track and this will be a challenge, said Jeffrey Franks in the end.
Romania Loan In No Danger Of Suspension
The International Monetary Fund’s decision to postpone the conclusion of a budgetary revision in Hungary should not have any influence on Romania’s EUR13 billion agreement with the fund, IMF mission chief Jeffrey Franks said Monday.Mid-July, the IMF and EU suspended a review of Hungary's funding program, saying the country must take action to lower its budget deficit. Romania last year secured EUR20 billion in funds from the IMF, EU and other international institutions to cushion the effects of the recession. Following this mission, the IMF will decide whether to release a sixth disbursement to the country, worth around EUR900 million.
Prime Minister Boc on IMF agreement: Some things can be improved, but deficit remains 6.8 percent
Some aspects of the agreement with the International Monetary Fund (IMF) can be improved, but, this year, Romania must maintain the deficit target amounting to 6.8 percent of the gross domestic product, said Prime Minister Emil Boc on Monday.'We are evaluating the current situation and I say that, at this moment, we have the situation under control. Some things are better, others can be improved and we are preparing the framework for 2011,' Boc told Radio Romania Actualitati (RRA).'The deficit targets are the ones agreed on and we must keep them,' underlined Boc.
The Head of Government explained that the IMF mission, which arrived in Romania on Monday, was making an assessment visit and also considering the budget adjustment the Government was to make in early August.
'At this time, the IMF assessment visit will analyze the budget adjustment, which we have prepared for the beginning of August to maintain the budget deficit agreed on with the IMF, discuss the policies to maintain the target deficit up to the end of this year and for the next one,' Boc also told RRA.
