Bucharest, March 18, 2008: Romanian President Traian Basescu met Thomas Mirow (EBRD President). BUCHAREST, Romania: Romania will get an emergency credit-line for €18-20 billion ($24-26 billion) from the International Monetary Fund, the European Union and the World Bank to survive the global economic crisis, a Romanian official said Wednesday.
Although a final agreement has yet to be announced, Mihai Tanasescu, the country's representative to the IMF, said the deal is imminent and will help stabilize and boost the economy.
An IMF delegation is currently on a visit to Romania to discuss the loan.
Prime minister Emil Boc said Wednesday that two-thirds of the loan will go to the National Bank, to boost foreign currency reserves and keep the national currency, the leu, at a level that will not hurt the economy. Another part of the bailout funds will go to commercial banks to support mortgages and other loans.
Tanasescu warned economic activity would slow further in April but that if the government manages the loan well, the economy would gradually improve.
He tried to ease fears that taxes will rise as a result of the loan and said that the social implications of the economic crisis — such as higher unemployment and cost of living — were an important issue in the negotiations with the IMF.
Romanian President Traian Basescu, Prime Minister Emil Boc and National Bank Governor Mugur Isarescu met with IMF officials on Tuesday to discuss the loan.
Basescu has said that money from the IMF is the "cheapest that Romania could receive."
The country's central bank warned last month that it might need help to shore up its foreign currency reserves, which amounted to €26.2 billion ($33.2 billion) in December.
Financial analysts have said the expected influx of capital from the loan should calm fears of an immediate meltdown in the economy and could lead to a near-term bounce in Romanian markets. However, it won't eliminate the need for a fundamental depreciation in the leu, they say.
IMF: Romania's 2009 GDP forecast to minus 4%
The International Monetary Fund(IMF) forecasted Romania's gross domestic product in 2009 to minus3 percent or even minus 4 percent, Mihai Tanasescu, Romanian representative to the international lender, said on Wednesday.
IMF's report said that Romanian budget deficit might be higher than 4 percent of the GDP, significantly above the 3 percent Maastricht Treaty threshold, according to Tanasescu, a former Finance Ministry from December 2000 to December 2004.
Last Thursday, Romania's Finance Minister Gheorghe Pogea said that the country is considering an economic growth at between minus one percent and 1.5 percent, although this year's state budget is built on 2.5 percent growth.
The European Commission recently revised downwards Romania's projected growth to 0 - 0.5 percent, after having previously estimated the Romanian GDP would expand at 1.8 percent this year.
In 2008 Romania recorded 7.1 percent economic growth, but such pace slowed down to 2.9 percent in the last quarter.
An IMF mission is visiting Bucharest over March 11-25 in order to continue its assessment of the Romanian macroeconomic conditions.
The delegation will hold talks on a possible IMF program for Romania. Such program will be part of a multilateral pro-active and safety financial package to be backed by the European Union and the World Bank among other international financial institutions.
According to government sources, the Romanian authorities intend to borrow 19 billion euros (23.75 billion U.S. dollars), 12billion euros from the IMF and 7 billion euros from the EU, following an evaluation made by the Finance Ministry and the central bank.
