IMF Board Postpones Meeting On Loan Agreement With Romania

The postponement was announced by Jeffrey Franks, head of the IMF mission to Romania. He said the measures affected by the Court's ruling were an important part of the amendments to the stand-by agreement. However, Franks said talks on alternative measures are in progress and he is confident they would be put before the board very soon.

The Government and IMF are discussing 6-7 approaches to keeping the budget deficit around the target 6.8% of GDP stipulated in the agreement, most of which provide tax hikes, said Romania's representative to the IMF.

The government recently sought a confidence vote in Parliament for a law package including a 25% cut in public salaries and 15% reductions in pensions and unemployment benefits.

The Constitutional Court Friday ruled the pension cuts unconstitutional and sent the law back to Parliament for revision. Other austerity measures in the law package were deemed as "disputable", but the court didn't see fit they should be reexamined in Parliament.

In May, Franks said a delay in implementing Romania's planned fiscal measures in the public sector could prompt the IMF to reschedule the release of a fifth loan installment (worth EUR850 million) to the country until the measures are in place.

The next installment of a EUR13 billion loan agreement signed last spring is conditioned by Romania's ability to implement the promised measures, Franks said at the time. He didn't rule out the possibility that the IMF will release the fifth and sixth installments simultaneously in the fall if the Romanian government fails to make good on its promises by the board's meeting due end-June.

Last year, the IMF and Romania agreed on a EUR12.95 billion stand-by loan, part of a EUR19.95 billion financial support package, which includes funds from the European Union and the World Bank.

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