Table of Contents

I. What is the IMF?

II. Romania and the IMF
III. Why did Romania turn to IMF?
IV. Evolution of IMF Loans
V. Future IMF Strategies
VI. Downsides of IMF
VII. Conclusion
 What is the IMF?
The International Monetary
Fund (IMF) is an organization
of 187 countries, working to
foster global monetary
cooperation, secure financial
stability, facilitate
international trade, promote
high employment and
sustainable economic
growth, and reduce poverty
around the world.
 Romania and the IMF
 Our country has the second
biggest financial burden to the
International Monetary Fund: 16.7
billion dollars.
 Romania a incheiat pana in
prezent cu FMI 10 acorduri stand-
by, dintre care trei inainte de
1989, iar sapte dupa aceasta data.
 Tara noastra a devenit membru cu
drepturi depline al FMI la 15
decembrie 1972, fiind, la acel
moment, cel de-al 125-lea stat
membru.
 Why did Romania turn to IMF?

1975 – 1989:
 trade balance deficit
 increasing foreign debt
 accelerarea reformei economice
 reforma sistemului financiar-bancar

1992- 1994:
 diminuarea inflatiei
 incheierea miscarii corective a preturilor
 eliminarea subventiilor acordate de stat
 stabilirea unei rate a dobânzii real-pozitive
1997 -1999
 mentinerea deficitului
bugetar la un nivel
rezonabil
 reducerea ratei inflatiei
 diminuarea deficitului
de cont curent
 consolidarea fiscala si
restrictionarea cresterii
salariilor,
 cresterea rezervelor
valutare ale BNR
 atragerea capitalurilor
straine
2001-2009 
 sustinerea procesului de
dezinflatie
 mentinerea deficitului de
cont curent concomitent cu
accelerarea reformelor
structurale si intarirea
perspectivelor de crestere
economica.
 Future IMF Strategies (2009+)
Public employment and the
compensation system:
 pay scale harmonisation
 elimination of bonuses;
targeted reduction in wage bill.
 The public sector wage bill is
targeted to be reduced by 2%
of GDP by 2015.

Fiscal responsibility:
 independent fiscal council;
 binding medium‐term
 budgetary framework including
expenditure, deficit and debt
rules.
Pension reform:
 changes in pension indexation;
 increases in retirement age
and minimum contribution
period;
 expansion of the contribution
base.

Tax administration reform:

 new legislation to improve tax
collection, which is poor by EU
comparison.

Reinforcing banking sector:

 measures for strengthening
capitalization
 rate and reducing risks faced
by banks.
 Downsides of IMF Aid
In order to receive loans from the IMF,
Romania will have to agree to
austere conditions, such as:

 slashing of government budgets

 the sale of government assets to
local elites and foreign corporations
("privatization")
 deregulation of the economy
 promoting exports and trade at the
expense of local needs
 removing protections for local
producers growing food or
manufacturing for the local market
 removing labour rights protections
 increased interest rates
 regressive tax increases
 currency devaluation
 Conclusion: IMF
 Global financial crisis is
deep!
 Financial integration is
significant!
 The IMF is mitigating the
crisis by:
 Intensified coordination:
○ member countries, other
IFIs, EU, and banks
 Providing financing to
smooth the adjustment:
 Functioning as an external
anchor provided authorities
are committed!
 Further encouraging global
policy coordination