Romania Starts Reimbursing IMF Loan

Bucharest is making its first repayment on a rescue package loan borrowed from international lenders.Romania is to repay 671 million euros on Monday, the first tranche of a 20-billion-euro rescue package from the International Monetary Fund, the European Union and the World Bank.It obtained the loan in May 2009 in exchange for agreeing to push through austerity measures aimed at taming the country’s deficit.

The payment comes at a difficult moment for Romania, when political tensions in the Balkan country are sending the wrong signals to international markets, analysts warn.

„Bucharest will have no problems in paying off the first tranche of the IMF loan, but will face difficulties in the near future, when more money has to be returned. In fact, the problem is that Romania’s economy has become stagnant with the IMF money being used only to pay public sector salaries and pensions while the available EU money is not being used at all,” says journalist Bogdan Panduru.

„Romania’s national debt is certainly low compared to other European countries, but that is because there is so little economic activity in the country, and not because of some magical strategies implemented by the successive governments,” he added.

Romania’s economy is already in crisis, according to official data, and economists are worried for the immediate future.

The National Statistics Institute, INS, last month confirmed that Romania entered into recession during the first quarter of the year, when the economy dropped by 0.1 per cent in the last quarter of 2011.

The economy is deemed to be in recession as GDP shrunk quarter-on-quarter for the second time in a row.

Furthermore, political uncertainties are also hitting the economy, according to analysts.

For months, Romania has been gearing up for a major fight between President Traian Basescu and Prime Minister Victor Ponta, whose new leftist government has a majority in parliament.

The ruling coalition tried to oust Basescu from his post, but a referendum on the president’s impeachment has yet to be validated as the turnout was below the needed threshold.

While President Traian Basescu has argued that the low turnout was in fact a vote in his favour, the ruling coalition challenged the results, arguing that the lists of eligible voters had not been updated.

The Constitutional Court is to decide on August 25 on this issue.