THE GOVERNMENT TO THE IMF We are still vulnerable to the evolution of the international financial markets

Alina Toma Vereha (Translated by Cosmin Ghidoveanu)
Ziarul BURSA #English Section / 6 aprilie 2011

We are still vulnerable to the evolution of the international financial markets

The executive is betting on an economic growth of 1.5% this year, amid the continuation of the upward trend of exports, the gradual increase of domestic demand and the increased absorption rate of European funds. In the Letter of Intent published on the website of the IMF, the Romanian authorities show that inflation is forecasted to return within the band forecasted by the National Bank (NBR), after climbing to 8% at the end of 2010, on the back of the raise in VAT, as well as of the rise in the prices of foodstuffs and fuel.

The NBR stands by its commitment to cut the inflation target to 3% in 2011 and 2012. Even though over these past few months inflation has increased considerably, the members of the government are expecting it to fall in the second semester towards the target proposed by the NBR.

The current account deficit has decreased significantly, from 11.6% in 2008, to about 4.5% in 2010. In its letter, the Romanian government states that, in spite of the expected improvement of the economic indicators, Romania is still vulnerable and can be negatively influenced by the evolution of the international financial markets (higher borrowing risk, reduced capital inflows and a risk of a slowed down recovery of the Eurozone).

Economic growth of 4-4.5% in 2012

According to the new precautionary agreement with the IMF, the members of the government estimate an economic growth of 4-4.5% in 2012. They have based their optimistic forecast on an increase in domestic consumption, which will once again become the engine for economic growth, but only with the added effect of a better absorption of European grants.

In order to reach these macroeconomic targets, the Government has committed to keep the deficit at 4.4%of the GDP in 2011, to keep the taxes unchanged, as well as to lower social security contributions, if the economy grows and tax receipts increase. Wage expenses will not exceed the limits allowed by the IMF, because the nominal increase in wages will be balanced out by the elimination of the 13th wage and of the holiday bonuses. The pension point will remain unchanged, and hiring in the public sector will remain low, as just 1 out of 7 jobs in the system will remain will be occupied.

Deficit of 3% of the GDP in 2012

In 2012, the Government promises a reduction of the budget deficit of 3% of the GDP, on the back of further cuts in the public sector, including wages, as well as the implementation of the law concerning fiscal responsibility. The number of changes of the fiscal system will be restricted to ensure the predictability of the business environment. "We have begun preparing the fiscal strategy for 2012 - 2014, an important step towards the implementation of the law of fiscal responsibility. We will strengthen the Fiscal Council by allocating larger funds to it, we will improve budget planning and we are looking to reach the targets imposed by the Maastricht Treaty", the Romanian authorities state in the letter to the IMF.

The government has also promised simplified taxation for smaller taxpayers, and the unification of several taxes, starting this year. Thus, the government will develop the payment system and the on-line submission of tax forms.

When it comes to improving absorption of European grants, in the first semester, the Romanian authorities have allocated larger amounts for investments. In the second half of the year, as long as the results are satisfactory, new solutions will be found to allocate additional funding.

The banking sector will become profitable again this year

The rise in the number of non-performing loans has slowed down in Q4 2010, reaching 11.9% of the total loans.

Since economic growth will resume in 2011, loan-loss provisions will stabilize in Q1 2011, and the banking sector will become profitable again. The banks will be well capitalized, and the parent banks have kept their exposure to Romania at 98% in January 2011 compared to the ratio of 95% agreed upon in March 2009. "We will resume the discussions with the European Bank Coordination Initiative - EBCI to gradually ease the exposure of international banks as the foreign lending conditions improve", the Romanian authorities say in the letter of intent.

A review of the project portfolio for European grants

When it comes to European grants, a revision of the existing portfolio will be made, with a particular focus on those that have secured funding for the next 3-5 years, the viability of old projects will be reviewed, and the results will be presented in June. The final report and the new action plan will be ready in September. Facilities will be created for the relocation of the funds between projects/programs for a better absorption.

The Executive has also made the commitment to implement the recently announced wage reforms in the public and pension sectors. In order to encourage the increase in the volume of tax receipts, the authorities are looking to stimulate employees in the system by offering performance bonuses of up to 30%

The government has also pledged to operate welfare cuts. By the end of July, a system for providing subsidies will be set up, which will target only those social layers that need the aid. In the letter to the IMF, the government also promised expenditures will be cut in education and healthcare.

A reduction in the number of hospital beds funded by the state budget

The number of beds funded from the state budget will be reduced from its current number of 135,200, to 133,000 by the end of June and to 129,500 by December 2011, the letter of intent of the Romanian authorities states. The number of hospitalized patients will be reduced by 10% compared to the numbers of December 2010, and the amounts reimbursed to doctors will be reduced from 70% to 50%.

The authorities of Bucharest have made a commitment to review the list of subsidized drugs to have them replaced with generic drugs.

Far-reaching reform in energy and transportation

The government has pledged to reform from the ground up the state owned companies that have increased the fiscal burden. The debts of some of those companies have become so big that they amount to over 4% of the GDP, as the state allocates huge amounts to subsidize their operations and to allow them to continue.

Thus, the authorities have promised to the IMF that they will prepare the plans of action for their improvement by July 2011. The plans will include the lists of companies that will be sold, restructured and privatized.

Concerning the regulated prices, the Government has pledged to present by September a strategy for the liberalization of the market for gas and electricity, to ensure the independence of the ANRE (the energy market regulator). By year end, the authorities will define the categories of vulnerable consumers, including the means for protecting/subsidizing their energy bill.

The Executive has stressed that the new contracts for the sale of energy will be performed exclusively through the OPCOM, in a transparent and non-discriminating manner.

The contribution of capital needed to state owned energy companies will be made by selling minority stakes on the stock exchange: 10% of Petrom which is currently under way, 15% of Transelectrica by the end of the year, 15% of Transgaz by the end of the year and 15% of Romgaz by the spring of 2012.

"if we are going to succeed in the strategy for implementing the two national energy champions, we will immediately introduce mechanisms that will prevent cross-subsidies, according to the recommendations of the Competition Council. If we fail to set up these companies by the end of the year, we will look for other solutions, including the sale of majority stakes in certain energy companies", the Letter of Intent adds.

For the National Coal Company, the government is considering insolvency, in order to rescue it, and perhaps sell it. Some of the mines will be closed according to the EU rules. Termoelectrica will be shut down after the spin-off of its profitable assets.

The National Highway Company (CNADNR) will increase its revenues by terminating or renegotiating its unfavorable contracts.

The divisions of the Romanian Railway Company will also continue their restructuring and streamlining program. A minority stake in CFR Marfă will be put up for sale by the end of the year in an attempt to find a strategic investor. In the case of CFR Marfă the authorities will propose a 15% reduction of the losses and no new debts will be taken on. In the case of CFR Infrastructure, the Ministry of Transports proposes the shutting down of 1000 km of railroads by the end of August and the auctioning off to private operators of another 20% of the railroad network.

The company will need to reduce its losses by 25% and to stop taking on further debt.

In the case of Tarom, the Executive is proposing a complete review by the end of April in order to determine the method for attracting strategic investors.

Businesspeople consider that the macroeconomic targets that the Government has pledged to reach under the Letter of Intent sent to the IMF, can be accomplished, but subject to specific circumstances. Cristian Pîrvan, the secretary general of the Romanian Association of Businesspeople (AOAR), explained: "The targets aren"t unrealistic. An economic growth of 1.5% in 2011 and of 4% in 2012 is possible due to the increase in industrial output. The constant growth of the industry over these past few months is a good sign and it shows that economic growth has resumed in the Eurozone, which is where the bulk our exports goes. As for domestic consumption, I think it may contribute to economic growth as long as the public spending will be increased and more private investments will be drawn".

He emphasized that the government does not explicitly mention any major privatization or private-public partnerships it may have. Thus, it is not clear under which circumstances domestic consumption will increase. It also isn"t clear what measures to increase absorption of European grants will be taken. (A.T.)

The increase in the ratio of non-performing loans has slowed down, and the IMF experts estimate that the peak will be reached by mid-2011, a report on Romania"s situation quoted by Agerpres states. The repayment by Romania of the loan to the IMF will reach its peak in 2013-2014, when the service of the debt will represent 11.9%, and 12.2% respectively of the total reserves and approximately 9%, and 8.4% respectively of the value of exported goods and services.

"Even though this exposure remains big, the risks are mitigated by the relatively low level of the direct public debt (37% of the GDP), and the public foreign debt will amount to a maximum of 16% in 2011, the total foreign debt will amount to 83% of the GDP by end-2012", the experts of the IMF state, who also consider that Romania will meet its "financial commitments to the IMF".

The inflation target for the next two years is very ambitious, considers Daniel Dăianu, an economics professor. He said: "It is indeed true that the following months and the second half of 2011 will bring with it a drop in inflation, barring further shocks, but the target nevertheless ambitious. The condition for coming very close to meeting the inflation target would be to have no more price increases for fuel, energy or further depreciation of the Romanian currency. It is indeed true that the frail economic recovery is vulnerable to the evolution of the foreign markets, namely of the financial and consumer markets".

He added that the inflation and economic growth targets are not impossible nor unrealistic, subject to the existence of the private and public investments that would spur a recovery in domestic consumption, beside the one we are seeing in exports. There is also uncertainty when it comes to the promised growth in the area for the increased absorption of European grants, which could ensure a boost of domestic demand. (A.T.)

The IMF has forced the Government to include in the budget deficit the losses of 30 companies and the shares of the Proprietatea Fund

FMI has forced the Government to include the losses of 30 state owned central and regional companies as well as the shares of Fondul Proprietatea, as the companies were required to periodically notify to the Ministry of Finances their financial ratios and the operations performed. The list of unprofitable companies whose losses will be included when calculating the consolidated budget deficit The National Coal Company, the Romanian National Road and Highways Company, Metrorex, the River Administration of the Lower Delta Galaţi, The National Coal Company, CFR Călători, Radiocomunicaţii Navale Radio Constanţa, CFR Infrastructură, Termoelectrica, Acvavalor, The Airports of Arad, Satu Mare, Tulcea, Iaşi, the International Airport of Baia Mare, the Ştefan Cel Mare airport of Suceava, the Transilvania airport of Târgu Mureş, the thermal plants Aqua Calor, CET Braşov, Citadin Hunedoara, Dalkia Romania, Edil Therma Hunedoara, Goscomloc, Gospodărie Orăşenească, Rominservices Therm, the International Airport Mihail Kogălniceanu, Ecoterm, Termica, Termloc, the Thermal Plant of Comăneşti.

The list also features the Proprietatea Fund. The consolidated budget deficit will continue to be monitored on a quarterly basis, though the cash balance of the consolidated budget, and the authorities will be required to consult with the IMF concerning any corrective measures in the event of any fall in revenues and of government borrowing.

The arrears of the administration will need to fall this year from 1.1 billion lei to 900 million lei

At the end of 2010, the arrears of the Central Administration, of the social security budget, and of the local authorities amounted to 1.1 billion lei and will need to fall to 900 million lei by the end of this year, according to the technical memorandum with the IMF, quoted by Mediafax. At the end of 2010, the local authorities had debts of over 910 million lei to pay and they will be required to lower that figure to 800 million lei by December 2011. Still, the arrears of the local administrations will increase to 950 million lei in march 2011, and they will later begin shrinking gradually, by 50 million lei each quarter. "The indicative target set for the arrears of the local administration provides that there will be no further arrears and the current ones will be paid throughout the program.", the memorandum states.

Thus, the arrears of the central Administration, of the social security budget and of the local authorities will increase to 1.15 billion lei by the end of March, according to the indicative targets set in the memorandum.

"The performance criteria set concerning the stock of arrears of the central administration and of the social security budget provides its elimination throughout the program. (...)f needed, the government will adopt the corrective measures needed for preventing the accumulation of further arrears", according to the memorandum.

At the end of 2010, the arrears of the central administration and of the social security budget amounted to 190 million lei and will reach 200 million lei at the end of march 31st and June 30th, and they will then fall to 150 million lei in September and 100 million lei at the end of 2011.

The list of companies monitored by the IMF has been expanded to 18 companies

The list of companies monitored by the IMF has been expanded to include nine more companies, including Tarom, the Post Office, Oltchim, SNLO, Electrica Transilvania Nord, Complexul Energetic Turceni and several other railroad companies, while the Land Improvement Administration (ANIF)was removed from the list. The list of companies whose financial and staff policies are monitored by the IMF, continues to include CFR, CFR Călători, The National Highway Company (CNADNR), The National Coal Company, Termoelectrica, Metrorex, CFR Marfă, Electrocentrale Bucureşti and Societatea Comercială Electrificare CFR.

The ANIF has been removed from the list of monitored companies as its debts to the state budget have decreased significantly last year, from 65.7 million lei to 1.9 million lei.

At the same time, the list of monitored companies now also includes the Romanian Post Office, Tarom, Complexul Energetic Turceni, Filiala de Intreţinere şi Servicii Energetice "Electrica Serv", Electrica Furnizare Transilvania Nord, Oltchim, The National Lignite Company of Oltenia, as well as the Companies for Railway Maintenance and Telecommunications of the RRC.

The Romanian Postal Office has also been included on the list of companies monitored by the IMF, but the government removed it in 2007, after the end of the loan agreement with the IMF, as the unions threatened at the time that they would block the company"s operations if they were not allowed to greenlight the hiring of more employees and to raise wages.

SNLO, Oltchim and Tarom return to the list of monitored companies, after being on the list until 2005.

The IMF and the government expect the arrears of these companies to increase from 18.8 billion lei, at the end of 2010, to 19.5 billion lei in Q1 2011, to later fall to 19 billion lei, at t he end of September and to 18 billion lei, at the end of 2011.

The government and the IMF have also agreed on the schedule for limiting the losses without subsidies, taxes and interests of 2011, for the companied monitored by the state, which entail capping losses at 1.7 billion lei at the end of March, to 2.7 billion lei at the end of June, to 3.6 billion lei at the end of September and to 4 billion lei at the end of December.

Cotaţii Internaţionale

vezi aici mai multe cotaţii

Bursa Construcţiilor

www.constructiibursa.ro

Comanda carte
fngcimm.ro
danescu.ro
raobooks.com
boromir.ro
Mozart
Schlumberger
chocoland.ro
arsc.ro
domeniileostrov.ro
leonidas-universitate.ro
Stiri Locale

Curs valutar BNR

20 Dec. 2024
Euro (EUR)Euro4.9764
Dolar SUA (USD)Dolar SUA4.7908
Franc elveţian (CHF)Franc elveţian5.3538
Liră sterlină (GBP)Liră sterlină5.9910
Gram de aur (XAU)Gram de aur401.4137

convertor valutar

»=
?

mai multe cotaţii valutare

erfi.ro
Cotaţii Emitenţi BVB
Cotaţii fonduri mutuale
petreceriperfecte.ro
novaplus.ro
Studiul 'Imperiul Roman subjugă Împărăţia lui Dumnezeu'
The study 'The Roman Empire subjugates the Kingdom of God'
BURSA
BURSA
Împărăţia lui Dumnezeu pe Pământ
The Kingdom of God on Earth
Carte - Golden calf - the meaning of interest rate
Carte - The crisis solution terminus a quo
www.agerpres.ro
www.dreptonline.ro
www.hipo.ro

adb