The International Monetary Fund has postponed the completion of its review of Romania’s support package until November to give the government time to decide on fiscal measures, Prime Minister Victor Ponta said.
While the program remains “on track” and funds are accessible for Romania, the review will be completed after the cabinet drafts its 2015 budget following a Nov. 2 presidential election, Ponta said today in an interview in Bucharest. The government in the meantime is working to devise budget measures to offset the effect of a planned cut in employers’ social contributions, he said.
Romania, on its third consecutive IMF program since the global financial crisis rocked the country in 2009, is looking to wean itself off the Washington-based lender’s assistance as it works toward a goal of adopting the euro in 2019. Economic growth of 3.8 percent in the first quarter from a year earlier, the European Union’s fastest pace, is allowing the government to encourage investment with a tax cut, Ponta said.
“This year is a safe year, because we will keep the budget-deficit target,” he said. “But then, in 2015, Romania has an obligation to continue decreasing the deficit and here we must keep working on the concrete measures.”
The leu decreased 0.1 percent to 4.3925 per euro as of 9:04 p.m. in Bucharest. The benchmark BET stock index gained 2 percent to 6,911.63, the highest in six years.
The second-poorest of the EU’s 28 members stopped drawing IMF funds in 2011 and won’t seek a new deal with the lender after the current accord ends next year, Ponta said. It plans to rely on the European Commission’s supervision and regulations to maintain fiscal rigor and meet budgetary targets, he said.
The government plans to cut social contributions paid by employers by 5 percentage points from Oct. 1, even if the IMF doesn’t agree, Ponta told reporters in Bucharest after the interview.
The IMF predicts Romania’s economy will grow 2.8 percent this year. While the current account deficit has “remained low” and fiscal imbalances have improved, there is still work to be done, the IMF said in an e-mailed statement today.
“Teams have had constructive discussions with the Romanian authorities on how to ensure further progress and have reached agreement on important policies,” the IMF said in an e-mailed statement. “Some issues remain outstanding,” and talks with the government will continue, the IMF said.
Romania wants to raise at least 1.95 billion lei ($600 million) from the sale of a majority stake in power distributor Electrica SA in Bucharest and London in the country’s biggest initial public offering, starting June 16.
Depending on the Electrica offering’s success, the government is also considering the sale in 2015 of further shares in state-controlled companies including Transelectrica SA, Romgaz SA and Transgaz SA, according to Ponta, who said the government may be left with stakes of less than 50 percent in some -- though keeping a holding of more than one third in each.
“The government’s idea, which was also agreed on by the IMF, is to take the already successfully listed companies, especially in the energy industry, and continue the process of having more private capital.” Ponta said. “The first step would be to go down to 51 percent.”
Transelectrica shares gained 1 percent today and Romgaz advanced 0.3 percent in Bucharest.
Romania also plans to approve a new law on royalties in the first half of next year, Ponta said, adding that he doesn’t foresee a “significant” increase in oil and natural gas taxes as he wants country to remain “more attractive than others” in attracting energy investments.
Romania must also adopt a new mining law to allow the development of projects that meet “highest environmental standards,” Ponta said.
Lawmakers rejected a law that would have allowed Gabriel Resources (GBU) to open a gold mine in the village of Rosia Montana because of protests against the use of cyanide during the mining process. The new law will allow all qualifying projects to proceed, Ponta said.
“Unfortunately, a very economic subject has been turned into a very political one and every time the politics gets too much involved into the economy, it must be a failure,” Ponta said. “I’m a big supporter of all environmental standards, but this doesn’t mean we have to block all the projects.”
To contact the editors responsible for this story: Balazs Penz at email@example.com