The World Bank Office, Romania
ROMANIA WEEKLY UPDATE
Wednesday March 17 , 2004
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
Romania and WB launch USD 34.34mn
Forestry Development Project
The Government of Romania and the World Bank
officially launched in Brasov the Forestry
Development Project, which aims to improve the
sustainable management of state and private forests.
The total cost of the Forest Development Project is
$34.34 million, consisting of a US$25 million World
Bank loan, $2.3 million from the Romanian
Government, and $4.59 million from local sources.
The project has five components: Establishing systems
to ensure sustainable management of private forest
lands, Mitigating the consequences of restitution on
management of state forest land, Supporting increased
productivity and competitiveness of forest industries,
Building public support for sustainable forest
management and Managing and monitoring the
project.
“This project is designed to improve the management
of production forests, with key roles for the Ministry
of Agriculture, Forestry and Rural Development
(MAFRD) and the National Forest Administration
(NFA)”, explained Owaise Saadat, World Bank
Country Manager for Romania.
February inflation
The monthly CPI-measured inflation rate in February
2004 stood at 0.6 % m/m, according to data released
by the National Institute for Statistics (INS).
Consumer
pricemeasured
inflation
Total
Food
Non-food
Services
February 2004
compared with: Monthly average
inflation rate
during 1 I – 29 II
Jan2004
0.6
0.8
0.5
0.5
Dec2003
1.7
1.2
2.3
1.7
2004
0.9
0.6
1.2
0.9
2003
1.1
1.6
0.9
-0.1
The Government forecasts a 9% end-of-period
inflation this year. Price hikes of food products
continued to decelerate in February to 0.8% m/m. In
2002-2003, the food prices have constantly increased
at a slower rate than the headline inflation, while
services prices have increased at a steeper pace. The
Statistics Office has announced a new basket for
computing the CPI, based on the households'
consumption in 2002.
Romania negotiates new arrangement with IMF
The talks with the IMF on a new SBA have started
later than planned and the outcome is not certain yet.
The conclusion of a new SBA, likely of a
precautionary type, depends on the country’s ability
to embark upon a large set of reforms, including
tighter wage policies, justice reforms and governance
matters. The Fund mission that has been in Bucharest
over the last few weeks presented to the Government
the draft evaluation report on the impact of the
macrostabilization programs negotiated over the last
14 years, which is to be debated by IMF's Managing
Board on March 22. The Fund's draft report on the
country's transition since 1989 reportedly criticizes the
slow structural reforms. The IMF is expected to decide
on a new agreement in the coming weeks and would
send a new mission to Bucharest for final talks on the
Memorandum of Understanding in April. The EU
expects Romania to smoothly continue its relations
with the IMF and a failure of the Government to seal a
new arrangement, irrespective of the reasons, would
negatively impact upon the accession talks. A negative
Fund's report on the past year's reforms would most
likely sink the Government's hopes for completing the
talks with the EU this year and bringing the country
into the Union in 2007.
International reserves of NBR reach EUR
6,429.4 mn
At end-February 2004, foreign exchange reserves of
the National Bank of Romania ran at EUR 6,429.4
million The EUR 78.3 million increase in February
2004 was the result of the following: EUR 63.4
million worth of purchases by the central bank on the
forex market; EUR 21.4 million worth of incomes
from international reserve management; EUR 57.2
million worth of principal repayments and payment of
interest on external public debt, direct and bearing the
guarantee of the Ministry of Public Finance; EUR
50.7 million in other net inflows (change in the
foreign-exchange required reserves deposited by
commercial banks, surrenders to official forex
reserves, bank fees and commissions, membership
quotas, etc.). By end-2004, payments due on external
public debt, direct and bearing the guarantee of the
Ministry of Public Finance, amount to EUR 1,293
million.
Additional information can be found at www.bnro.ro
BCR employees to purchase 8% of bank's
shares
The employees of BCR will start negotiations for
purchasing 8% of the bank's shares immediately after
they log a formal request, according to Romanian
media sources. After the deal, the Privatization
Agency will remain with 36% of the shares. On
another plane, EBRD and IFC are close to take over
25% of the bank's shares for USD 222mn. The price
thus paid by the two foreign investors is USD 1.13 per
share against a USD 0.33 face value.
State-run companies turned into shares debts
of USD 240 million
The state-run companies got rid last year of budgetary
debts of ROL 7,651 bn (USD 240 mn) by turning into
shares their debts held by AVAB, according to the
AVAB’s 2003 report. More than a third in the total of
transformed debts represent Oltchim RamnicuValcea’s debt. According to Law 137/2002 on
stepping up privatization, AVAB is compelled to turn
into shares the debts of the companies under
privatization.