IMF Puts Fresh Accord With Romania on Hold

A review of a precautionary agreement between Romania and the IMF and the EU has been put off to November, after the government has drafted its 2015 budget, according to Romanian officials.

“Romania’s programme with its international lenders remains on track. But the IMF is to finish the review of the precautionary agreement by the end of the year, after we draft the budget for next year,” Prime Minister Victor Ponta said on Thursday.

Ponta met a mission from the Washington-based international lender, which is currently in Bucharest to conduct the third review of Romania's precautionary stand-by arrangement.

Officials have tried to persuade the IMF to approve a set a measures aimed at creating more jobs and increasing incomes. The main goals are to cut the social security tax, CAS, by 5 per cent and reduce VAT on meat, fruit and vegetables.

Ponta added that CAS will be cut by 5 per cent for employers starting October 1, after the Parliament will adopt a law in this regard. The measure will generate a budget hole of Lei 850 million (some 190 million euro) but without affecting the deficit.

Romanian companies currently pay CAS of 20.8 per cent of the gross salary of their employees.

The IMF has not expressed an official viewpoint on these issues, but media reports say it will not look favourably on cuts to the CAS, as this would lower the government's revenues.

Romania concluded its last deal with the IMF and the European Union worth 4 billion euro last July.

The standby arrangement is for 24 months, and includes 2 billion euro from IMF and another 2 billion from Brussels. The government does not intend to draw on the money.

This is the third agreement that Romania has requested from the IMF since 2008, when...