EXCLUSIVE: Romania Takes Significant Steps To Exit Crisis, IMF Says

"We are starting to feel recovery in growth and we see a significant reduction in the deficit, and these two factors together reduce the risk for Romania. So (…) right now, I see that the prospects for the situation in Romania is better than in some euro area states who are currently having difficulties," Franks told MEDIAFAX reporters.

Franks said the risk premium for Romanian is lower than the ones in states like Portugal, Ireland, Hungary or Latvia, as the government has already taken significant measures to come out of the crisis.

"Some very tough measures to reduce the deficit were taken in July. Revenues are increasing, expenditures are falling. The risk premium for Romania in international markets has fallen since the tough measures were taken, because international markets know that Romania is in a more sustainable situation now," the IMF official added.

Romanian government implemented a series of austerity measures as of July, including a 25% pay cut in the public sector and a 5 percentage point increase in the sales tax to 24%.

The structural reforms have helped Romania to turn its fiscal situation from an "explosive" one to one that is "coming down naturally and [the budget deficit] will be under 3% [of GDP] in 2012," Franks said.

"This is a huge change. The structural reforms that have been undertaken in the program and the ones that are still being approved, like the unified wage law, the pension reform, the fiscal responsibility law (…) are making a huge impact on the perception of the international markets have about how sustainable Romania is," he added.

Regarding a series of recent comments made by IMF's managing director Dominique Strauss Kahn, Franks said the official referred to countries that had difficulties in the past and turned to IMF for support.

Dominique Strauss Kahn said in a television interview for a Swiss channel Wednesday that a series of "vulnerable" European economies, such as Greece, Ireland, Latvia, Hungary and Romania, need to implement harsh measures to bring their budget deficits in line.

However, no European state is risking default, Strauss Kahn said.

"The managing director was very clearly referring to why countries came to the IMF initially, and what he said is that countries that had unsustainable situation sought assistance from the IMF like Hungary and Romania and Latvia," Franks said.

"All these countries he used as example are countries that came to the IMF two years ago, and in any case, these countries are in no danger of default," he added.

Romania and the IMF last year signed a EUR13 billion loan agreement, part of a larger EUR20 billion package that includes funds from the EU, the World Bank and other lenders.

So far, the eastern European country received EUR11.3 billion in IMF money and another EUR3.65 billion from the EU.

The IMF board is expected to decide on a new EUR870 million disbursement in January next year, provided Romania meets a series of preconditions included in an additional letter of intent to the agreement.

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