EIU Expects Romania To Negotiate External Loan From EU, Based On IMF Stand-By Agreement

“We expect that the government will negotiate an external financing package with the EU based on a new stand-by agreement with the IMF, in a bid to restore confidence in its policies and meet its balance of payments obligations,” EIU said in a report on Romania’s outlook.

Romanian authorities are expected to make a decision regarding an external loan in the upcoming weeks.

The Government is currently in talks with the European Commission on financing the country’s budget deficit, Prime Minister Emil Boc said Wednesday.

The main alternative under discussion is taking funds from the European Commission, under IMF surveillance, sources close to the matter said.

Last week, central bank governor Mugur Isarescu said a potential loan from the IMF should be included in a package of agreements between Romania and other European institutions, such as the European Investment Bank or the European Bank for Reconstruction and Development.

Romania’s current account deficit was at the end of 2008 at EUR16.88 billion, slightly wider than a year before.

EIU sees the external gap at 10.9% of the GDP in 2008 and expects it to be at 9.7% of the GDP at the end of 2009.

“We assume that Romania will be able to meet its financing requirement in 2009, through medium- and long-term inflows, FDI inflows, IMF/EU funding and running down foreign exchange reserves,” EIU said.