ING Says IMF May Delay Loan Disbursement To Romania

The ING analysts believe Romania might be confronted with the same situation as Latvia after its government collapsed in February this year. The IMF has delayed disbursing a scheduled tranche from March through August, until Latvia approved additional austerity measures for the 2010 budget, ING analysts said.

However, the IMF might take a gentler approach with Romania, they noted. Romania has yet to approve the draft budget for 2010 and chances are the act will not be adopted until next year.

In addition, Romania’s budget deficit could widen further, exceeding the cap of 7.3% of the gross domestic product the authorities in Bucharest and the IMF have agreed upon after the first review mission of the loan in August.

According to ING, the IMF agreed to send the second assessment mission to Romania before a new government is in place to calm the financial markets and help ease pressure off the national currency.

On Thursday, the IMF said a second assessment mission will be in Romania October 28 through November 9 to review the country’s economic performance and discuss the objectives for the next year.

However, a follow-up mission may be necessary, due to „ongoing political developments,” the IMF said in a statement.

Romania and the IMF signed in spring a two-year standby arrangement for EUR12.95 billion, as part of a wider EUR19.95 billion aid package the Eastern European country took from the EU, the World Bank and other foreign lenders to cope with the recession.

The World Bank also announced Thursday that will visit Romania at the same time as the IMF to assess the country’s progress, even if it recently stated the visit was postponed until Romania has a new government.