Romania Still Vulnerable To International Financial Mkt Turmoil - IMF

World financial market tensions contributed to a sharp nominal depreciation of the Romanian leu, and Romania remains vulnerable to additional adverse spillovers from events in global markets, the International Monetary Fund, or IMF, said Saturday.

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Energy price increases have already pushed headline inflation above the central bank’s target range, the Fund said in a statement.

IMF officials said the key challenge for Romanian authorities in the period ahead will be to strengthen policies and enhance structural reforms to support convergence to EU levels, consistent with Romania’s ambition to adopt the euro by 2014.

"This will require a better balance between fiscal and monetary policies to counteract private sector-driven macroeconomic imbalances,” the fund said.

In view of upcoming parliamentary elections, the IMF underscored the importance of maintaining wage discipline in the public sector and resisting pressures to increase social spending or cut taxes.

The IMF also observed that large capital inflows related to Romania's accession to the European Union, compounded by procyclical fiscal policies, have contributed to booms in domestic demand and credit.

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