IMF or not, it"ll still be us paying for it all

• Ministry of Finance wants to borrow 6 billion lei in November • Băsescu: "The situation is already critical"

• Boc: "There could be trouble paying pensions and salaries in December"

Romania lost the 1 billion loan from the European Commission which it was supposed to receive by the end of 2009 in order to fund its current deficit, and runs the risk of compromising the last installment of the loan from the IMF worth 1.5 billion Euros, if it doesn"t keep the commitments it made by mid-December.

The announcement was made yesterday by the chairman of the National Liberal Party, following the talks with officials of the IMF and the European Commission, after president Traian Băsescu had declared on Wednesday that we can no longer count on the installment from the Commission, as it will be postponed until January.

Thus, out of the 3.5 billion Euros that Romania needs by year end, it can only rely on the 1.5 billion Euros installment from the Fund, as, according to Crin Antonescu, "neither the European Commission nor the World Bank can provide Romania with money any longer due to technical procedures".

"Only the IMF is left to grant Romania money in December", said Crin Antonescu.

On Wednesday, president Traian Băsescu said that Romania will receive the installment from the EU in January 2010, and that the government will need to come up with 2 billion Euros instead of 1 billion by December 31st 2009. Out of the 3.5 billion that Romania needs by the end of the year, 1 billion was supposed to come from the Commission, 1.5 billion from the IMF and the remaining one billion from other sources (foreign or domestic markets).

The EUR 1 billion loan from the foreign markets, that the Ministry of Finance was looking to take in early autumn, may be postponed, according to sources from the interbank market, and if it gets done, it will get done at a much higher cost, due to the current political crisis, which comes on top of the economic crisis.

Traian Băsescu recently said: "The IMF was supposed to evaluate Romania three times ago, and that would have meant receiving the EUR 1.5 billion installment from the Fund in November, and the one of EUR 1 billion in December. Currently, due to the delayed arrival of the IMF"s mission following the fall of the government, the IMF will disburse the first installment in December instead of November, and the installment from the EU will come in January. So the Government needs to come up with two billion instead of one billion instead by December 31st. Already, the situation is critical". According to the president, finding the two billion Euros on the domestic market is a hard goal: "I don"t know if there are such resources available on the domestic market", said Băsescu.

Thus, the Government will need to borrow from the domestic market at an interest rate higher than that of the loan granted by the Commission.

The Ministry of Finance has scheduled for November an issue of 6 billion lei (around 1.39 billion Euros), 137% more than what it raised in October.

Besides, not even the 1.5 billion Euros loan from the IMF is certain. Out of that loan, 750 million Euros would go towards consolidating the forex reserves of the NBR, and the remaining amount would go towards funding the public deficit. According to Crin Antonescu, by mid-December, Romanian authorities would need to come up with a budget draft with a deficit of 5.9% and to enact the Law of Pensions, the Law of Fiscal Responsibility and the Law of Unified Compensation.

Prime minister Emil Boc yesterday said, on the public radio station that the Government has funds to pay salaries and pensions for the months of October and November, but warned that in December there could be "problems".

"If we do our job, we can be certain we"ll receive the IMF installment", said Emil Boc, speaking of the objectives taken on.

It needs reminding that one of the commitments, namely the passing of the law of unified wages, is blocked in the Constitutional Court after assumptions of unconstitutionality, with CCR scheduled to issue a verdict on this matter on December 9th.

After all, the money taken from the IMF will need to be reimbursed from our own pockets, just as the loan is backed by our pockets. Of course not directly, but through the National Bank and the commercial banks. The latter are the only winners of this operation.