The Ministry Of Finance Asks The IMF To Roll-over Its Debt

The Romanian Government still defaults on its obligation to pay back its debts, and continues to ask the International Monetary Fund for a roll-over of its deadline.

Since the beginning of the IMF stand-by agreement with Romania, in May 2009, the Executive repeatedly asked the IMF for a delay on paying its debts, as it never made the deadlines agreed before.

The IMF agreed upon schedule said the state debt should drop to 1.27 billion lei by the end of March, to 1.09 billion lei by mid-year, to 810 million lei by the fourth quarter, and to 480 million lei by year-end.

There should be no debt to the state budget by the end of April 2011, which is scheduled to be the ending of the IMF program in Romania.

However, the IMF continued to go easy on the Romanians, and allow them to further postpone the agreed upon deadlines, which it did not in the case of Hungary, the Hungarian media comments.
The difference may come from the fact that Hungary has a long track of defaulting on the EU regulations regarding the budget deficit, comments Hungarian economist Bod Peter Akos, former Central Bank Governor.

The IMF officials say the budget deficit target was more lax in Romania's case as the economic forecast for the country was negative, while in the case of Hungary the target was tight since the forecast was for economic growth.

At the same time, Romania adopted drastic long-term measures, like hiking the VAT by 5%, cutting dramatically the salaries in the public sector and the social benefits, while Hungary took no such measures, the IMF officials said.

Another difference of economic status which led to a different IMF treatment of the same problem of budget deficit may lay in the different weight of their respective public debts, with Hungary owing 80% of its GDP, and Romania owing 30% of its GDP.

IMF allowed Romania to go for a 6.8% of GDP budget deficit, while it asked Hungary to stay at 3.8% of GDP.
Translated by AAP