State-owned company floatation can replace agreement with IMF

By selling the significant stakes it still holds in its companies on the stock market, the state can plug the holes in its budget and also offset the domestic currency depreciation trend, thus avoiding a new loan from the IMF.

The recent experience of the floatation of a petroleum giant in an emerging country, Brazil's Petrobras, reveals that a public offering can generate, besides money to the budget, an appreciation of the exchange rate. The Brazilian state sold 70 billion dollars' worth of Petrobras shares and while the offering was still standing, the country's currency significantly appreciated, because of the high demand from foreign investors, making the central bank buy foreign currency to balance the exchange rate.

In 2009, the state borrowed 20 billion euros from the IMF, the European Commission and the World Bank, with the main reason for that being that the money was needed for the National Bank to boost its foreign currency reserves to defend the exchange rate. Part of the money later went to the state budget to pay pensions and public sector's employees' salaries.

At the same time, Poland sold several billion euros' worth of shares on the stock market and did not need any loan from the IMF, and the depreciation of the zloty was lower than the RON's.

The Economy Ministry promised to sell about 10% in Petrom and 15% in Romgaz, Transgaz and Transelectrica each and could collect almost one billion euros from these stakes alone. Although the Government did approve the sale of these shares, the Economy Ministry has not started the procedure to choose a broker at least. On the other hand, the President announced that Romania would sign a new arrangement with the IMF next year.