Press release
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Page 284
The IMF approved an eight-month Stand-By credit for Romania in an amount equivalent to SDR 400 million (about $547 million) to support the government's economic stabilization and reform program. The loan will be made available in four installments. The first installment, which will be available immediately, will be in an amount equivalent to SDR 53 million (about $73 million).
Following are excerpts from IMF First Deputy Managing Director Stanley Fischer's statement on the Executive Board discussion.
"Executive Directors welcomed the authorities' renewed commitment and effort to correct severe economic imbalances and long-existing structural weaknesses. Directors considered that the authorities' program, if fully implemented, would mark a major step forward in Romania's quest for financial stability and establish the basis for sustainable growth. They noted with satisfaction the authorities' recent up-front actions in several policy areas, including fiscal strengthening and progress in bank restructuring and privatization.
"However, against the background of the uneven implementation of previous IMF programs, and in light of the weakness of the economy, Directors urged the authorities to hold firm to their policy commitments, as this is essential for regaining market confidence. Directors stressed the importance for the recovery of the economy of persevering with both fiscal and structural adjustment, and cautioned against a premature relaxation of financial policies.
"Medium-term fiscal sustainability and structural reforms were seen as key for the establishment of sustained noninfla-tionary growth.
Directors regretted that, despite the authorities' efforts, it had not been possible for them to obtain the desired amount of private sector financing. They emphasized that it is vital that Romania continue to work vigorously toward obtaining additional private foreign financing in support of its reform program and that implementation of their stabilization and structural reform program would contribute both to restoring access to capital markets and to economic recovery and growth.
Romania has lagged behind most other transition economies in Central and Eastern Europe in economic reform and stabilization, mainly because of a lack of sustained policy efforts. Although prospects improved in early 1997, when a coalition government tightened...
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