Romania Ctrl Bk To Use Own Cash To Refund EUR5B IMF Loan Tranche – Fin Min

The ministry responded to a series of allegations made by liberal Bogdan Olteanu, vice-chairman of the Deputies Chamber.

In a news conference Sunday, Olteanu said the IMF loan would be refunded from the state budget.

“By early August, Romania has borrowed EUR15.5 billion, namely over 63 billion lei. Following additional bond issue from the finance ministry, the Boc government (Romanian Prime Minister Emil Boc – e.n.) might exceed by yearend the frightening ceiling of EUR20 billion in loans carried out during a single year,” Olteanu said.

“The amounts will be paid by the citizens.”

In reply, the finance ministry said the IMF loan does not represent public debt and it will be refunded by the central bank.

“The first installment of the IMF money was aimed at consolidating the country’s foreign currency reserves and the money played a significant role in reducing the minimum required foreign-currency ratios of Romanian banks, contributing to corresponding liquidity on the money market,” the ministry said in its statement.

Given the worsening economic conditions and the higher budget deficit target of 7.3% for this year, Romania will finance half of its deficit from external sources, with loans taken from the European Commission and the World Bank, as well as with part of the next two installments of the IMF loan.

The move will lead to reduced interest payments, the ministry said.

“The estimated interest is of up to 4% for the loans related to the external financing package, compared with the coupon carried by the state bonds issued on the local market, which is currently at 10.5%-10.75% a year.”

In March, Romania and the IMF signed a EUR12.95 billion two-year standby arrangement, as part of a EUR19.95 billion financial support package that also includes cash from the European Commission, the World Bank, and the European Bank for Reconstruction and Development.

Romania has already received a first tranche of EUR5 billion from the IMF, while the next two installments, or EUR1.9 billion and EUR1.5 billion, are due for September and December, respectively.

Early August, the IMF has agreed to allow Romania run a higher budget deficit of 7.3% this year, nearly double from the 4.6% cap initially agreed upon this spring.

The Fund also accepted that EUR1.72 billion of the next two installments will be used to cover the Romania’s budget deficit.

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