Romania may get loan tranche released soon from int’l lenders

BUCHAREST (Reuters) – An International Monetary Fund (IMF) board may discuss the release of a fourth tranche of Romania’s $396 million standby loan in early April, an IMF official told Reuters yesterday. The IMF withheld the release of funds in October, saying wage rises in state-owned companies were too steep and warning that a 43 percent rise in minimum salaries from this year was undermining efforts to bring down inflation. «The disbursement of the fourth tranche is likely to be discussed at a board meeting, possibly in early April,» IMF resident representative Graeme Justice told Reuters. He said the outcome depends on the conclusions of an IMF mission which is in Romania for a two-week visit to evaluate the country’s progress in meeting the targets it set in its accord with the Fund. A Finance Ministry official said preliminary data shows that Romania has met the condition that it hold down wage rises, and that the macroeconomic indicators – inflation, current account deficit, foreign reserves – look good. Wage policy has been a tricky issue for the ex-communist Balkan country, trapped between the Fund’s strict demands and the needs of its poor population living on average monthly salaries of around $100. Justice said the government will need to draft a supplementary letter of intent to reschedule the disbursement of the tranches, and that the last two tranches of the loan might be coupled together in July or August. Romania had to extend the accord with the IMF to end-August from end-March because one of its key elements, the privatization of its biggest bank Banca Comerciala Romana (BCR), was hit by the economic slowdown and problems with the bidders. Dutch ING Bank withdrew from the race last September and the two remaining bidders failed to qualify, forcing the government to look for new ways to privatize BCR, whose assets make up one-third of the country’s total banking assets. The government had said the IMF endorsed plans to offer minority stakes in BCR to the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation, the investment arm of the World Bank. A Finance Ministry official said the deadlines for the partial privatization of BCR would be outlined in a supplementary letter of intent which would be drafted at the end of the visit of the IMF mission in Bucharest. Justice said the IMF mission would end its visit to Romania on February 19. Meanwhile, the city of Bucharest risks losing about 450 million euros’ worth of international loans badly needed to revamp the Romanian capital’s roads and crumbling infrastructure if it does not use the money quickly, the city’s mayor said. Mayor Traian Basescu, whom many describe as the only vocal political opposition to Romania’s ruling ex-communists, said vital funds secured by his office for projects such as fixing up roads and schools were blocked by his political opponents. At stake are three loans from the European Investment Bank and the EBRD totaling 452 million euros, he said. A 220-million-euro loan from the EIB for upgrading roads and sewage has been stopped by the city council, controlled by the ruling Social Democratic Party.