The Government and the NBR asked the IMF that the currentfunding arrangement approved at the end of March to be stand-by,the same as the one signed in 2009, with the only distinction beingthe "intention" of the authorities not to use the funds.
The wording used in the letter of intent leaves room to theauthorities to actually draw the money from the IMF and theEuropean Commission, thus offsetting expectations of getting awayfrom the "debt spiral", i.e. the alternative of repaying debts toforeign funders by taking on more debt from them.
After two years of dramatic adjustments, which materialised inredundancies, in cutting salaries of public workers by 25% and theVAT hike, Romania still does not dare apply for programmes of the"flexible line of credit" and "precautionary line of credit"type.
The flexible line of credit was created by the IMF especiallyfor countries where there are no big macroeconomic imbalances, butwhich need protection against the effects of the global financialcrisis. Poland was the second country to resort to the flexibleline of credit from the IMF, after Mexico.
In the case of the emergency loans granted by the IMF tocountries such as Romania, Hungary and Ukraine, the institution hasrequested compliance to strict criteria, such as cutting the budgetdeficit and external imbalances.
The Romanian authorities and the IMF do not rule our recessioncontinuing this year, expecting a 0.5% decline in 2011 in thepessimistic scenario.
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