Moody’s Sees EU, IMF Aid To Romania EUR20B Over 2 Yrs

Moody’s Investors Service affirmed Friday the Baa3 local and foreign currency ratings of the Romanian government, with a stable outlook, citing the moderate public debt burden, though it expects Romanian economy to contract in 2009.

"Today’s (Friday – e.n.) rating affirmation is premised on the attainment of an IMF/EU financing program, coupled with a successful fiscal adjustment," the rating agency said in a press release.

Moody’s expects Romania to obtain extraordinary financial assistance from the EU and IMF to ease the adjustment as its economic environment deteriorates, with a total support package of more than EUR20 billion over two years.

Approximately one-half of the support will come from the IMF and the remainder will be provided by the EU and related institutions. The programme will likely be structured whereby the IMF funds are provided for balance of payments support, and the EU funds will be used for budgetary financing, thereby easing immediate liquidity concerns.

Romanian authorities are currently negotiating with the IMF and the European Commission a financial package.

"There are strong incentives for both the Romanian government and the EU to cooperate to stabilise Romania’s economy," Kenneth Orchard, Vice President-Senior Analyst in Moody’s Sovereign Risk Group, said in the press release.

"Should there be signs that the EU is becoming less inclined to support Romania, however, a downgrade of the government’s ratings to below investment grade would be likely," Orchard added.