(story to be published in tomorrow's issue, March 9)
International Monetary Fund directors did not approve on Monday evening the "technical extension" of the stand-by accord with Romania requested by Romanian Premier Isarescu last week, grounding their decision on the recent salary raises in the Education sector. Analysts say that the decision, though unofficial, expresses the Fund's opposition to the economic programme of the Cabinet led by Isarescu that is trying to reach economic growth in year 2000 directly from investments, without awaiting lower inflation, and to measures of fiscal reform the Government adopted without an ok from the IMF. The standard programme of the IMF, applied in Romania as well, focuses on reducing and then controlling inflation, budgetary and foreign deficits. The last three years have proved however that a simultaneous control of the three indicators is impossible, the economy undergoing an unprecedented fall. IMF's programmes required each year an inflation target smaller than the one requested the year before, though the respective target had been overshot. Thus, though in 1999 the target-inflation of 32-35 percent turned to 55 percent in real terms, for year 2000 the IMF asked for a target of 27 percent, which specialists deem as unrealistic. "IMF Europe director, Michael Deppler, stated during the informal meeting of the Fund's Management Board related to Romania that revenues and expenditures projected by Romanian authorities within the budget draft on this year are too optimistic," said Ioan Dragulin, Romania's representative with the IMF. Romanian Finance minister Decebal Traian Remes was surprised by Deppler's statements. "We did our homework and observed deficits we had agreed upon in relation to the consolidated budget, as well as for the state budget. I do not understand where the problem lies," Remes said. Stephane Cosse, IMF representative in Bucharest, says however that the decision has not been made yet: "the technical extension problem is being debated in Washington," the Fund's official said on Tuesday. The Government at the end of last week sent a letter to the Fund where it pledges to cut down the number of special funds before the budget is voted in Parliament, soliciting a "technical extension" by 4-6 weeks of the current standby accord that expires on March 31. The accord stipulated loans worth about 547 million dollars, in four tranches of which Romania only received 70 million dollars, automatically granted after the agreement was sealed. The Fund's not having disbursed the second tranche was never motivated officially and though the accord did not stipulate any relation between the second tranche and the budget on year 2000, IMF experts announced they would discuss the disbursement of the tranche when the situation of the budget is cleared out. The technical extension does not involve any decision on the money, as it is a mere procedural issue and for a decision to be made in this sense a meeting of the IMF board is not necessary. This decision is made by the general director, a position temporarily held by Stanley Fischer, after holding informal consultations with the directors. "The IMF considers that salary raises within the army and education sectors are anachronous, dangerous and will generate chain reactions at the level of the entire budgetary apparatus," says Dragulin. Government sources on Tuesday told Ziarul Financiar that the accord signed with the IMF was endangered "after the management clearly brought under discussion the problem of a confusion in salary policies".
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