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. Last Updated: 07/27/2016

Bucharest Comes a Step Closer to Loans

BUCHAREST -- Romania has cleared a major hurdle by pushing a tough International Monetary Fund package through parliament, but it must show its free-market reform commitment before it can get new IMF loans.

"We are pleased parliament endorsed the economic memorandum," IMF resident representative Joshua Greene said.

Parliament voted last week to approve a controversial deal agreed with the IMF, including radical reforms of the exchange and interest-rate systems and industrial restructuring, tight budget control and privatization.

The vote was in line with the IMF's desire to see the deal endorsed by the conservative-dominated parliament.

But Romania still has to prove its commitment through radical economic measures sought by the IMF before new loans totaling up to $700 million can be released.

A senior Western banker said Romania had yet to get parliament's approval for a 1994 austerity budget, plus a package of unpopular laws designed to stiffen the tax system.

Apart from the draft budget, this month parliament must approve four key pieces of tax legislation including local taxes, a farm income tax, company profits tax and new excise duties on petroleum products.

"The deadline is tough, but it would be ideal to have these laws approved by the end of February, to allow enough time for the European Union's monitoring committee to prepare its report on Romania, needed by the IMF board," the banker said.

Romania is seeking around $700 million in new IMF credits for 1994-1995, including a 16-month standby and access to a new Fund facility designed to support reforms in Eastern Europe.

Bucharest signed the memorandum of agreementfor the new loans two months ago, but parliament's vote was delayed by wrangling between parties in the ruling left-nationalist coalition.