Sky-rocketing inflation, lack of public administration restructuring, the unsolved situation of Banca Agricola (Agricultural Bank), inability to cut down arrears and bad management of salaries within the administration sector and the loss-making state-owned national and commercial companies can lead to the failure of the programme concluded with the International Monetary Fund.
On the other hand, the Government led by Prime Minister Mugur Isarescu does have some achievements to lay on the table of discussions to be held with the Fund's chief negotiator Emmanuel Zervoudakis: success in reaching the annual economic growth target of 1.3-1.5 percent of GDP, the increase in exports (above expectations), control over trade deficit and current account deficit, the increase in foreign currency reserves, the substantial cut down in interest rates.
Consolidated budget deficit is on the edge for the first six months, amounting to 12,800 billion lei, namely 1.76 percent of GDP. By the end of this year, it will have to be confined within the 3.5 percent of GDP limit, but salary raise demands and requests for larger budgets will surely create budgetary pressures.
Defying the pledge of the NBR-governor-turned-Premier that he would halve inflation this year as compared to last year, when it reached 55 percent, the inflation rate has already jumped to 24 percent on the first seven months because of higher prices for food products, but also due to increased tariffs for public utilities. The Premier has meanwhile adjusted his target, to 31-32 percent, but this new objective also seems difficult to attain.
The problems of Banca Agricola were not solved by finding some bidders in haste, just before signing the Agreement extension memorandum in May 2000. Negotiations came to a dead end and there is no guarantee that they will be resumed in time so as to generate any results by August 29.
As concerns arrears, the largest "generators," namely Conel, Romgaz and Petrom, on June 30, 2000 should have had to recoup from providers debts amounting to a "mere" 18,700 billion lei, but the latest data available (around May 15) point to 24,000 billion lei in debts, which are unlikely to be cut down.
But the incapacity to control wage increases in public administration, national companies and loss-making state-owned enterprises will be the most difficult issue to explain to the members of Zervoudakis team. The Government's Emergency Ordinance 85/2000, which was confining the wages in loss-making companies to four times the wages granted in the fourth quarter of the previous year, was cancelled by Justice, one week after it had been issued. Then, it was negotiated and renegotiated so as there is nothing left of it.
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