Romania has reached an agreement with major international lenders for a €20 billion loan designed to finance the country’ sbudget and current- account deficits.
According to the agreement, the International Monetary Fund is to lend €12.95 billion, the European Union – €5 billion while the rest will come from the World Bank, European Bank for Reconstruction and Development and other organisations.
“The objective of the policy package is to cushion the effects of the sharp drop in private capital inflows,“ IMF Managing Director Dominique Strauss-Kahn said in an statement.
The loan from the Washington-based lender will be disbursed over the next two years with a €5 billion installment coming after approval by the IMF executive board, the statement said.
Local economists and investors hailed the agreement, saying that without sufficient foreign investment and cash floating to Romania’s largely foreign-owned banks to finance lending, the country risks running out of money to pay debts and keep the economy functioning.
Romania is following some other European countries, including Hungary, Ukraine, Belarus, Latvia and Serbia, which have already sought rescue loans to prevent defaults and aid banks.