The IMF has completed the seventh and eighth reviews – the last ones under its stand-by arrangement with Romania, the Fund announced. Romania has successfully completed its second consecutive two-year agreement, acting chair Nemat Shafik announced.

He, however, underscored that the growth remains weak and the realisation of the potential depends on structural reforms in the energy and transport sectors and in state-owned enterprises.

The IMF completed the two reviews after previously approving three waivers for non-observance of the performance criteria on i. net foreign assets of central bank, ii. the general government balance, and iii. the central government arrears, based on corrective actions taken by the authorities. Details on re-defining these targets and the meeting of the new targets were not revealed though.

As we reported, the Fund approved in March a three-month extension of the stand-by deal with the view of giving the government more time to meet certain targets.

Upon the successful completion if the two reviews, the Fund makes available to Romania another SDR 451mn [EUR 521mn] tranche, bringing the total sum available to the country to SDR 3.1bn [EUR  3.57bn]. Romania, however, has treated the arrangement only as precautionary and decided not to draw any of the disbursements made available under the reviews.

IntelliNews Comment: The fiscal consolidation and macroeconomic stabilisation had been achieved largely under the previous 2009-2011 stand-by arrangement with the Fund when a tough austerity package was enforced in mid-2010. Macroeconomic stability was preserved during the second two-year deal despite the change of the political majority.

The performance in reforming state-owned companies was, however, modest and a very small part of the targets were met in this regard, while the most difficult were postponed.

The successful completion of the stand-by arrangement with the IMF brings Romania one key benefit – namely it opens the door for another two-year follow-up arrangement. The government has mentioned such an option, and the central bank and President Traian Basescu have even urged for it.