Romania and the IMF

The International Monetary Fund is well aware of the dispute between president Traian Basescu and Prime Minister Victor Ponta over the measures needed for attaining the budget deficit stipulated in Romania’s standby agreement with the IMF.

“We are keeping a close eye on developments in Romania and we expect the authorities to take a decision if they want to modify the policies needed to ensure the budget deficit target,” IMF communication manager Jerry Rice said in Washington.

The IMF official went on to say that the measures would soon be sent to the IMF Board for approval.

While the IMF is currently on standby, the verbal conflict between the President and the Prime Minister is far from over.

On the one hand, Prime Minister Ponta is awaiting the response of the European Commission on a prospective three-month postponement of the introduction of a 7 eurocents excise duty on fuel.

Originally the Prime Minister wanted this measure to come into force as of January 1, 2014 in order to offset the increase of salaries and pensions and the decrease of social security contributions.

On the other hand, responding to the fears and concerns voiced by road carriers, president Basescu warned earlier this month that unless the Government came up with alternatives to the 7 eurocents fuel excise increase, he would not sign the budget for next year in its current form, and said he would send it back to Parliament for debate or even take the matter to the Constitutional Court.

Everyone is on standby

The President said the increase of the excise is in fact completely unnecessary, given that the budget has enough resources as it is.

Basescu feels the measure would hinder economic growth and go against Romania’s best interests.

Therefore he has refused to sign the memorandum between the Government and the IMF, explaining that the country does not depend on the financial aid of the IMF, while the re-negotiation of the memorandum creates no financing problems.

Otherwise said, for the time being, everyone is on standby.

President Basescu is waiting for the Prime Minister to join him in what he has called a “man-to-man conversation” until December 29, by which date the head of state must take a decision with respect to the budget law.

The Prime Minister is waiting for international lenders to express their point of view, while the IMF is waiting for Bucharest to decide whether or not it wants to change policies for attaining the budget deficit target.

Whether it signs the memorandum or not, Romania must comply with the recommendations on structural reforms and budget policies, said the European Commission, which is also waiting for Romania to make a final decision with respect to its agreement with the IMF.

Romania decided to have this agreement in the first place, and it now has to decide whether it carries on, the Commission also added.