Romania Must Borrow Extra EUR5B, Apart From IMF Loan, To Meet New Budget Deficit Target

Basescu said that, if the country implements the spending cut program agreed with the IMF, Romania will have a 6.8% budget deficit this year. The head of state highlighted that, in order to keep the deficit within this limit, the country would have to borrow extra EUR5 billion from the market, but only after talks with the IMF.

The president said that, without the loan agreement signed with international institutions, Romania would have had a budget deficit of 9.1% of the gross domestic product, which translates into EUR11.7 billion.

Romania and the IMF have agreed on a budget deficit of 6.8% of GDP in 2010, from an initial target of 5.9% of GDP, and the country must implement a series of cost cutting measures, such as reducing subsidies and slashing the public sector salary fund by 25% and pensions by 15%.

The IMF will only disburse the fifth tranche of the EUR13 billion stand-by agreement after the government implements these measures.

Joint teams from the IMF, EU and the World Bank were in Bucharest until May 10 for the fourth review of Romania's progress under a loan agreement. Romania's loan agreement with the IMF is part of a larger EUR20 billion package that includes funds from the European Commission, the World Bank and other foreign lenders.

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