The economy is not showing any signs of life, and there are no governmental relaunch steps to make a visible impact, so that the Finance Ministry is negotiating with the IMF "an emergency solution", to finance the budget deficit by using part of the money initially intended to consolidate NBR’s foreign currency reserve to protect the RON/EUR exchange rate, government sources say.
Redirecting the money could involve the second tranche of the loan from the IMF (1.9 billion euros) that should be released in September based on the assessment of the mission expected in Bucharest on July 29.
The financing of the budgetary deficit that risks rising to over 7 billion euros is becoming Romania’s main problem, because the pressure put by the Finance Ministry on the interbank market is already causing problems by keeping interest rates at high levels and reducing the amounts available for loans to private companies, and the launch of eurobond issues abroad is unlikely because of the rising costs.
The idea to use the money from the IMF came up amid the deterioration beyond expectations of the budgetary execution projections as a result of the worsening recession in the second quarter and probably in the third, as well. Each set of weekly data about budgetary revenue collection only serves to make forecasts worse, so that an up to 7% of GDP deficit is now expected, given an economic contraction that may reach 8% of GDP. The economy would thus lose 20 billion euros.
For the time being, the IMF has transferred 5 billion euros out of a total of 12.95 billion for the NBR reserve, while the EU should release about 1.5 billion euros from a total of 5 billion for the budget deficit.
The quoted sources say that any concession from the Fund will require new public sector spending cuts and commitments to speed up reforms.
At the same time, the Fi
