Fitch: Fiscal Consolidation Vital To Restore Confidence In Romanian Economy

„While we still see risks to implementation, we do believe that fiscal reform is viable in the current climate, as the need for reform is more obvious,” Fitch Associate Director EMEA Sovereigns, Douglas Renwick, told MEDIAFAX.

„Never let a crisis go to waste,” he added.

Renwick said Romania’s program with the International Monetary Fund and the EU has been helping with the reforms and that the public wage cuts announced by the government are a positive development.

„While fiscal consolidation poses risks to the economic recovery, in Romania’s case we see it as nonetheless vital in restoring confidence in the country’s economy as a whole. Insufficient fiscal consolidation and/or a derailing of the IMF/EU program would probably cause greater damage to the economy,” he added.

In 2009, Romania signed a EUR20 billion loan agreement with the IMF, the EU and other foreign lenders to tackle the effects of the recession.

At the latest review mission early May, the Romanian authorities and IMF officials agreed on a series of measures to slash public spending and tame the budget deficit, including a 25% cut in public wages and 15% reductions in pensions.

The IMF board is expected to decide on whether to disburse a new loan installment to Romania at the end of June.