Romania to sign two-year EUR 4bn agreement with IMF, EU – deal’s details

By bne IntelliNews July 31, 2013

Romania will sign new agreements with the IMF and the EU for another two-year period, under which EUR 4bn will be made available to the country, sources quoted by HotNews informed.

A key focus of the programme will be reforming the healthcare system, the sources said. Notably, the EUR 1bn unpaid bills to medicine suppliers, owed by the public healthcare system, were tackled under the previous agreement with the Fund. The payment arrears should be eliminated by the end of 2014, under the latest plans.

The EUR 4bn would be made available in equal shares by the Fund and the EU. The loans attached will however be used only under an emergency situation. Romania also treated as precautionary the past EUR 5bn agreement with the IMF and the EU.

The details of the agreement will be disclosed on July 31, the government said earlier this week.

Nonetheless, the sources informed that:

  1. A reform of the healthcare system will be pursued by a better financial management of hospitals and a more important role played by family doctors.
  2. A platform [secondary market] for the trading of public debt instruments will be set up within a year. This will supposedly improve the monetary transmission mechanism.
  3. More precise deadlines for structural adjustments will be set.
  4. The privatisation targets [a term used in the agreement with the Fund for both majority privatisation and floating minority stakes under IPOs, SPIs ] will be fewer but will be followed more closely. No more delays will be accepted.
  5. The privatisation of CFR Marfa will be accepted in case the buyer [GFR] is able to support the financial recovery of the cargo railway company. The foreign partners [the IMF and the EU] reportedly expressed objections regarding the privatisation procedures, but will accept the outcome if eventually the process will result in a better managed company.
  6. The ruling of alleged abusive clauses in bank lending contracts will still be issued on a case-by-case basis, and not in collective form as stipulated by the new Civil Code. Under the new Civil Code, the banks should apply the court’s decisions in all contracts of a certain type even if the decision was given in a particular case.

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