Accessibility links

Romania: Bucharest Looks Forward With Optimism

  • Radu Busneag

Bucharest, 21 April 1997 (RFE/RL) -- Bucharest is looking with optimism towards Washington this week, where some decisions important for Romania's economic future are to be taken. The World Bank, tomorrow, and The International Monetary Fund, probably also tomorrow, are set to decide the fate of an estimated $1 billion in loans for Romanian reforms. Referring to the IMF and World Bank loans, Prime Minister Victor Ciorbea says his government has now implemented or forwarded to parliament all the required measures and legislation -- as stipulated by a letter of intent from the government addressed to the IMF, 10 days ago.

Ciorbea mentioned the approval by the parliament last week of two central pieces of the reform -- the austerity budget for 1997 and the state banks privatisation law. He said also that his government has designated for shutdown 10 unprofitable state enterprises, which together account for 7.5 percent of the losses of the state budget.

Before the weekend he also announced the closure of two debt-ridden private banks -- Dacia Felix and Credit Bank. The two banks are complaining that the measure is based only on the government's commitments towards the IMF, rather than on the banks' performance. But central bank officials are saying that the closure should have been decided earlier, in that the National Bank of Romania pumped considerable funds in those two institutions to try to revive them, without result.

An RFE/RL economic correspondent in Bucharest notes that last Thursday, the joint chambers of parliament approved in the record time of one week the reform budget for 1997, with a vote of 230 to 157. The opposition in parliament maintains that the budget will induce a three per cent contraction of the economy this year (instead of two per cent, as predicted by the government), as well as a doubling of unemployment and a fall in living standards to below subsistence level.

The finance minister, Mircea Ciumara, told RFE/RL that the budget is meant to lift Romania out of the present economic crisis, and he said he realises that it implies sacrifices on the part of the population.

The 1997 state budget provides a deficit of $1.8 billion, representing 4.5 percent of Romania's predicted Gross Domestic Product. To finance this deficit, the government maintains it will use non-inflationary methods, like external or internal loans. The government will spend this year $7.5 billion and collect $5.7 billion.

The government is allocating $1.1 million for the economic sector, $960 million for education, $750 million for defense, $590 million for agriculture, $540 million for health and $122 million for research.

Another austerity law voted last week by the Romanian parliament is the social welfare package, which accounts for 10 percent of GDP. It provides an average monthly state pension the equivalent of $34. The opposition has sharply criticised this particular measure, saying again that it will produce "a dramatic fall of living standards and a rise in unemployment". The coalition in power has replied that it is the biggest social welfare budget to date, with unemployment funds for the first time directed to reconversion policies.

Our correspondent notes that the two chambers of the parliament have also approved the state banks privatisation law. This will free from state controls the top five Romanian banks that together control 75 percent of banking operations in Romania.

The reform minister, Ulm Spineanu, told RFE/RL that the exact strategy and the order of the state banks' privatisation is not yet established. However, he said, the Romanian Bank for Development will be definitely the first bank to be privatised, "because the others are not prepared" for the process.