Romania''s agreement with the International Monetary Fund has ended and the managing board of the international financial institution will be notified in November, the Fund''s Negotiator for Romania, Emmanuel van der Mensbrugghe stated yesterday.
Romania''s agreement with the International Monetary Fund is now off-track despite extensive negotiations on the second and third reviews, because the parties failed to reach an agreement on the budgetary deficit for 2006 and on the necessary steps to reduce the macroeconomic imbalances.
A release of the mission of the Fund that has conducted talks with the Romanian authorities over the last two weeks, says that with the current policy stance, Romania risks entering the European Union with a weakened competitiveness and growing macroeconomic imbalances. The release reads: "The IMF mission shares the view of the European Commission that a clear medium-term focus is urgently needed to bring policies in line with the requirements of a modern, low-inflation European economy. With the current policy stance, Romania risks entering the EU with its competitiveness weakened, growing macroeconomic imbalances, deteriorating education and health services and important gaps in the physical infrastructure. It is clear from our discussions that the Romanian authorities recognise these problems. However, strong and urgent policy actions are needed.
"Macroeconomic imbalances have continued to widen in 2005. Economic growth and productivity have started to falter despite rapid consumption-driven domestic demand. The current account has weakened with imports fast outpacing export growth; external debt has risen; and, despite a sizable exchange rate appreciation, inflation remains high, resulting in a sharp loss of competitiveness."
The IMF experts criticise the fact that the introduction of the f
