IMF Financing Might Boost Romania’s Economy – Ctrl Bker

The governor said the central bank would discuss "technically" using the IMF funds to finance the budget and not for foreign currency reserves consolidation.

“Eventually, the IMF funds will end up at the central bank. If the Finance Ministry spends this tranche locally, then it will sell foreign currency to the central bank and it will buy lei and the foreign currency will go to the reserves. Likewise, if the ministry uses the money abroad, then the central bank’s reserves will be spared from certain external payments,” Isarescu told a news conference.

Isarescu said such operation will not have an inflationist impact, even if it involves a currency issue.

The governor said the government must avoid blocking payments, as public spending is already rigid.

Romanian President Traian Basescu said Wednesday that he would talk to IMF representatives on using the second tranche of the IMF loan to finance the budget, instead of raising central bank’s foreign currency reserves.

Romania agreed in March with the IMF on a EUR12.95 billion two-year stand-by loan, as part of a EUR19.95 billion financial rescue package that also includes funds from the European Commission and other international institutions.

The first tranche, worth EUR5 billion, was released in May and entered the central bank’s reserve. The second tranche, worth around EUR1.9 billion, should be attracted on September 15, based on the results of the first evaluation and the economic performance in the first six months.

An IMF mission arrived last week in Bucharest for the first evaluation report.