WASHINGTON : The International Monetary Fund approved a standby loan of nearly two billion euros ($2.7 billion) to match a backup loan of the same size requested from the European Union. The IMF loan is a two-year standby arrangement for 1.98 billion euros, to give the government space to continue reforms. “The authorities have informed the IMF that they intend to treat the new arrangement as precautionary, and therefore do not plan to draw under it,” the Fund said. Romania also requested “precautionary support” of two billion euros from the EU, it said.
Romania has progressed under economic programs supported by two previous IMF standby loans, the Fund said, cutting its fiscal deficit and shortfalls in external accounts, and launching other structural reforms.
However, the IMF said the Romanian economy had not rebounded to its pre-crisis level.
“The economy is still vulnerable to external shocks, including volatile capital flows, and the reform agenda remains unfinished,” said Nemat Shafik, IMF first deputy managing director.
She said the country needed reforms in the transportation and energy sectors to improve the business climate.
She urged the continuation of a gradual deregulation of energy prices while ensuring protections for the most vulnerable consumers.