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Romania, IMF credit deal on track after fuel tax row

04 February 2014, 13:06 CET
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(BUCHAREST) - Romania and the IMF reached an agreement on sustaining a stand-by credit deal, threatened by a row over a fuel tax rise, an IMF official said on Tuesday.

"Staff level agreement has been reached, the programme remains broadly on track," IMF mission chief Andrea Schaechter told a press conference.

The centre-left government decided a 7.0-eurocent excise tax on fuel will be introduced in April, three months later than originally planned, after centre-right president Traian Basescu threatened to block the move.

The delay will generate a gap of 0.1-percent of gross domestic product in public revenues.

But Schaechter said that authorities had pledged to freeze spending of the same amount until July, when a new assessment is made.

"If revenues are stronger, there will be no need for further cuts," she said, adding the deficit target for 2014 was 2.2 percent.

"Authorities intend to continue fiscal adjustment in 2015, in order to reach Romania's medium-term budgetary objective of a structural deficit of 1.0 percent of GDP," Schaechter stressed.

The International Monetary Fund also said that Romania's growth was expected to stand at 2.2 percent in 2014, one of the highest rate in Eastern Europe this year but down from last year's estimated 2.8 percent.

"2013 was the year of recovery, with the strongest expansion seen by Romania since the crisis, estimated to have outpaced all other countries in the European Union except for Latvia and Lithuania," Schaechter said.

In July, Romania concluded a deal with the International Monetary Fund and the European Union on a 4.0-billion-euro ($5.5 billion) precautionary credit line, which the government intends to tap only in the case of a crisis.

It was the third accord signed with international lenders since 2009, when Romania obtained a 20-billion-euro bailout package in exchange for austerity measures.


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