IMF likely to resume payments to Romania

Romania could be awash with euros in February, with the possible delivery of $3.2bn delayed and future loan installments from the IMF and EU.

The International Monetary Fund said it will probably resume payments of its $30bn bailout loan for Romania, frozen on November 6 during government collapse. “We’re in discussions for the conditions for the disbursement” of more funds, Jeffrey Franks, head of an IMF mission to Bucharest, told reporters after visiting Romania’s central bank today. “I have reasons to believe it will go ahead.”

The IMF demanded the formation of a new government and the passage of the 2010 budget before resuming payments. Romania formed a government under Prime Minister Emil Boc on December 23 and Parliament approved the budget last week – it targets a deficit of 5.9 per cent of GDP (from 7.3 per cent last year). The budget also freezes wages for 1.3m state workers, targets 100,000 job cuts and lowers infrastructure investments by 28 per cent.

Standard & Poor’s said last week that passage of the budget and resumption of the IMF loan may trigger an increase in Romania’s credit rating outlook. The EU’s second-poorest member is rated BB+ at S&P, the highest junk grade, with a negative outlook.

The delayed tranche of €1.5bn plus a payment of €800m that was scheduled for March may be disbursed in February, the IMF said last week. The Romanian government may be able to use part of the next tranche to finance the budget deficit. The EU also said last week it will decide whether to send a delayed €1bn installment (from Bloomberg).