IMF May Start Preliminary Talks on New Romanian Loan, Fund Official Says

The International Monetary Fund may begin initial talks with Romania later next month on a new emergency loan, said Jeffrey Franks, the Washington-based lender’s mission chief to the Balkan nation.

“We may start some preliminary discussions, but we haven’t decided if we will start negotiating now,” Franks said in an interview while attending a financial conference in Bucharest today. A quarterly review of Romania’s current loan, which expires in May 2011, will take place from late October, he said.

Romania is scheduled to receive about 900 million euros ($1.1 billion) as the next tranche in its 20 billion-euro credit from the IMF, European Commission and other lenders if it proves it paid overdue debts to private companies and approves changes in its pension system by the end of September. The European Union’s second-poorest country took the loan last year because of dwindling budget revenue and currency concerns.

Prime Minister Emil Boc’s government raised the value-added tax by 5 percentage points to 24 percent and cut public wages by 25 percent from July to meet an IMF-agreed budget deficit target of 6.8 percent of gross domestic product and win approval for the previous loan payment.

The IMF allowed Romania to forgo the overdue debt payments before approving the previous five installments totaling 10.7 million euros.

Lawmakers must also adopt a law streamlining the public pension system and increase the retirement age by late September to qualify for the next payment, IMF representative Tony Lybek said on Sept. 1. The fund’s board will meet to decide on that review of the loan program in the second half of December.

To contact the reporter on this story: Andra Timu in Bucharest at atimu@bloomberg.net

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