Negotiations between the Tariceanu cabinet and the IMF to conclude an economic policy memorandum to supplement the precautionary arrangement signed by the former government in the summer of 2004 began yesterday. The talks are now being headed by State Minister Adriean Videanu, instead of the Finance Minister as was previously the case.
After the first meeting with the new IMF negotiator to Romania, Emmanuel van der Mensbrugghe of Belgium, Videanu said he hoped the drafting of the new memorandum would be finished by February 8, the date the IMF mission in Romania is scheduled to end. He added that as soon as the talks were completed, he would resign from his position in government to prepare as a candidate for the mayor of Bucharest.
Adjustment to the agreement is something that cannot be avoided given the fiscal changes caused by the introduction of the flat income tax.
"The IMF understands the necessity of the policy moves made by the current government in terms of fiscal reform and pension recalculation and we are focusing on the other fields we want to find solutions for. I am referring to the quasi-fiscal deficit; and here we will be more determined, not because of the macroeconomic balancing demands made by the Fund, but as a necessity for Romania," Videanu stated.
Yesterday, Emmanuel van der Mensbrugghe embarked on a tour of the main officials involved in the negotiations, starting with the National Bank. The Belgian is a typical stern, cold bureaucratic type without much use for innovation besides the solution provided by introducing data into macroeconomic models.
The IMF is setting the requirement of keeping the budget deficit to 0.7-0.8% of GDP, which does not leave much room for creating supplementary revenues.
The meeting of the IMF representatives with Calin Popescu-Tariceanu, the Prime Minister, lasted less than one hour, with each party stating its intentions and expectations in respect of the negotiations that began yesterday.
After the discussions were over, the Romanian Prime Minister said that Romania would fulfil its commitments to the IMF.
"The government will have to be extremely cautious with fiscal and monetary policy because the economic growth seen in 2004 indicates an economy overheating in the long run, which could have unfavourable effects," the Prime Minister explained. He added that the co-operation of the government with the IMF was a "still necessary" component, one which he was very appreciative of.
According to a release by the government's spokesperson, the head of the IMF mission to Romania said that the mission was in discussions with the government and the National Bank of Romania about the macroeconomic goals for 2005: economic growth, inflation, balance of payments and policies designed to achieve these goals.
"We are discussing fiscal and revenue policy with the government and the global exchange rate and the monetary policy with the central bank. Besides macroeconomic issues, we are also discussing reform. The important things here are the talks on energy policy, namely energy prices, the general situation of public companies, the privatisation programme, as well as the general climate regarding business and investments in Romania," Emmanuel van der Mensbrugghe said. razvan.voican@zf.ro
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