September 27, 2005

DOW JONES NEWSWIRES - Romania, IMF To Resume Loan Agreement Talks End-Oct -Min

Romania , IMF To Resume Loan Agreement Talks End-Oct -Min

BUCHAREST -(Dow Jones)- An International Monetary Fund team will visit Romania at the end of October to resume talks with the government on the country's frozen loan agreement, Finance Minister Sebastian Vladescu said late Monday.

"We agreed that a new IMF mission will come to Bucharest around Oct. 20," Vladescu told reporters in Washington DC . Vladescu and officials from the central bank have also discussed Romania 's future economic program with IMF officials during the IMF/World Bank annual meeting in Washington this weekend.

Romania 's $400 million standby loan agreement with the IMF was put on hold earlier this year amid disagreements over public spending.

Romania wants to join the E.U. in 2007, but the E.U. can delay accession until 2008 if the country doesn't meet the entry criteria. IMF agreements aren't a prerequisite for accession, but the E.U. takes them into account when it assesses the country's general reform progress.

Vladescu said the heavy floods of last week won't require additional spending. In July, the government said the budget deficit would increase to 0.98% of gross domestic product, from the 0.75% figure agreed with the IMF, citing reconstruction needs following heavy floods this year.

Spending required by the most recent floods would be contained within this deficit, Vladescu said.

Earlier this month, Vladescu said he would present the 2006 budget draft to parliament in October. The draft would be aimed at maintaining "macroeconomic balance," with a deficit of less than 1% of gross domestic product.

He said the government won't change main tax rates next year, maintaining the value-added tax rate at 19% and income and corporate tax at 16%. The rate of social security contributions will be cut by two percentage points to ease the fiscal burden for companies, Vladescu said.

Romania hopes to curb inflation to 7.5% this year, and to 5% in 2006 from 9.3% in 2004. The central bank has switched its monetary policy to inflation targeting this year and has set a range of +/-1 percentage point around the annual targets.