The World Bank Office, Romania
ROMANIA WEEKLY UPDATE
Wednesday November 27 , 2003
The material published in this newsletter is compiled by the World Bank's Bucharest office and staff in Washington, and on the basis of publicly available information. It does not
represent the opinion of the World Bank or any other official body. No responsibility for factual accuracy can be taken
IMF
The office of the IMF Resident Representative in
Romania has issued the following statement:
An IMF mission visited Bucharest between November
9-26, 2003 for initial talks on a successor
precautionary Stand-by arrangement, and will return
to continue discussions. The policy discussions
focused on how to maintain the good performance
achieved under the previous IMF arrangement in light
of strong domestic demand pressures. The recent surge
in consumer credit is of particular concern, and will
require a tightening of fiscal and monetary policies to
contain the impact on inflation and the growing
current account deficit. Structural policies discussed
aim at accelerating privatization, tackling the
remaining loss-making sectors, phasing in energy
sector reforms and other measures to ensure sustained
economic growth and strengthen Romania’s ability to
withstand the competitive pressures that will follow
EC accession.
Credit register to be set up
A credit register to allow the monitoring by the
commercial banks of their small and medium-size
customers will be implemented in the near future,
according to the National Bank Governor Mugur
Isarescu, who emphasized that currently individuals
can borrow above their repayment capabilities from
different banks. This step is part of a package intended
to curb consumer credit growth, which has increased
almost four times y/y. At the same time, Isarescu
confirmed that neither the minimum reserve
requirements not the main policy rate would be further
hiked in near term.
Current account deficit significantly up
The deficit of the current account of the balance of
payments stood at Euro 1.64 bn at end September (or
some 3.3% of the projected full-year GDP), up by
61% year-on-year, according to the National Bank of
Romania, and it is likely to exceed 6% of GDP at
year-end. The trade balance deficit (GNFS) stood at
Euro 2.39bn, up by 27.9% year on year.
sources inform that the National Bank Governor met
with the Finance Minister to discuss steps to be taken
for curbing the CA gap toward 5% of GDP next year.
percent
Balance of Payments, million of
9m 2003 change,
Euro
y/y
Executive Committee on European Integration
A Government press release reads that the Executive
Committee on European Integration, chaired by Prime
Minister Adrian Nastase, examined the European
Union agenda until the end of the year, the prospects
for Romania's accession negotiations, the negotiation
stage for the energy chapter, and Romania's transition
toward the Extended Decentralised Implementation
System (EDIS). The Committee decided that Romania
should switch to the EDIS by 2005 for the
administration of funds allotted by the European
Union under the PHARE and ISPA programs, and the
process should be coordinated by the Ministry of
Public Finance. According to the Government press
statement, the non-reimbursable financial support to
be extended by the European Union to Romania
through the next three years will reach Euro one
billion in 2006, channeled through three pre-accession
programs, namely PHARE, ISPA and SAPARD.
Technical discussions are being held in Bucharest
these days between representatives of the European
Commission and the Romanian Government regarding
the energy policy in the light of European integration.
Details available at: www.gov.ro
Net
Current account deficit, of
which:
-1,647
61.0
Trade deficit, GNFS
of which: goods only
-2,365
-2,389
28.0
29.4
Export fob
Imports fob
11,574
13,963
7.6
10.6
Current transfers
1,205
2.024
-0.3
Capital & financial account
of which:
952
Direct investment, net
-377
Errors and omissions, net
GNFS=goods and non-financial services
9.2
Foreign direct investment reached Euro 952 million,
up by 9.2% year-on-year, and current transfers
registered a positive balance of Euro1.2 bn. The
medium and long-term foreign debt increased 5.9%
relative to December 2002 and stood at 15.47 bn Euro
at end September. The public and publicly guaranteed
external debt stood at Euro 9.9bn and represented
some 64% of the medium and long-term external debt
as compared with 62.8% on December 31, 2002. The
National Bank’s (NBR) liquid foreign reserves stood
at EUR 6.63bn at end November or 3.7 months of
imports, down from 3.9 months at end-October.
NBR’s liquid foreign reserves went down by EUR
272mn through November owing to net sales on the
open market aimed to support the domestic currency.
www.bnro.ro
Central bank governor Mugur Isarescu warned that the
the current account deficit might reach 6.5% of GDP
by the end of the year, mentioning that the October
trade deficit stood close to double in y/y terms. Public
New Committee for Public Policy Reforms and
Structural Adjustment is set up
To accelerate the reform process in the public and
local administration, signaled by the 2003 EU
Progress Report as particularly important for the
country’s accession process, a Committee for Public
Policy Reforms and Structural Adjustment became
operational yesterday. The Committee enjoys the
support of the World Bank and the EU, a Rompres
statement reads. The Committee is replacing the
former Inter-ministerial Council for Public
Administration Reform.