Romania should decide by the end of next month whether to extend an existing loan from the International Monetary Fund or apply for emergency funding, Romanian President Traian Basescu has said.
Following a meeting with the IMF’s mission chief to Romania, Jeffrey Franks, Basescu said on Monday that Bucharest should assess the situation in October.
“We need to look at the costs of welfare and social spending – we have a €3.6 million deficit, which is dramatic,” said Basescu.
Franks said he and Basescu had agreed that Romania needs a great deal of European funding to improve its infrastructure.
Romania is relying on money from the IMF to finance its budget deficit as the effects of the global recession hit state revenues.
But accessing funds under the special “precautionary agreement” for emergencies would send a bad signal to investors and international lenders as it can only be given to countries in a critical economic plight.
Romania negotiated a €20 billion loan with the IMF, the European Union and the World Bank last year.
Part of the funds was used to pay state wages and pensions when the country’s economy shrank by 7.1 per cent in 2009. The agreement ends next year.