International Monetary Fund. External Relations Dept.
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In December 1989, with the fall of Nicolae Ceausescu, Romania reached a turning point in its history. The provisional Government that took over announced immediately a sharp and permanent break with the past, both political and economic. With respect to the latter, Romania was to abandon the central planning model under which it had operated since the late 1940s, and was to move as rapidly as possible to establish an economic system in which private sector activities would be given maximum scope and market forces would play the predominant role in economic decision making and resource allocation.
To clarify what the reform program is trying to achieve and the obstacles it faces, this section describes the main aspects of the centrally planned system in Romania and its development in the 1970s and 1980s.1 It covers first the developments in the economy from the early days through the 1970s, and then focuses on the 1980s.
Against a background of economic, institutional, and social crisis in Romania, a coherent reform strategy gradually emerged. This section examines the overall design of the reform program, and, in particular, how the reform strategy evolved.
The main objectives of the Romanian reform program fall into three broad categories: introducing market forces into the economy, notably by liberalizing prices, trade and the exchange system, and interest rates, and allowing these forces to guide economic decision making; transferring ownership to the private sector; and reducing the Government’s role in the economy. This section presents the specific policies and measures the authorities took to achieve each of these objectives.
This Selected Issues paper and Statistical Appendix analyzes the progress made by Estonia since independence. It takes stock of the developments in the banking system and describes how the number of banks in Estonia has been reduced through a series of bankruptcies and mergers from 41 in 1992 to 5 by end 1998. The paper explores nonbank financial sector developments. The paper also describes a composite index of coincidence indicators and tests how well it has tracked recent developments in Estonia.
This paper outlines the main characteristics and the development of the centrally planned economic sysetm in Romania before the beginnings of the transition to a market eonomy it then presents the design, objectives, and implementation of the reform program.
The Romanian reform program is designed to bring the country out of a strict centrally planned economic system into a world where individual choice and markets play the central role. In just over a year, considerable progress has been made. The status of the reform effort in the main policy areas is summarized in Table 3. The achievements to date become all the more striking if one considers that when the centrally planned system collapsed at the end of 1989, it left the country in the grip of an economic and institutional crisis, the outcome of four decades of central planning, compounded in the late 1980s by an almost religious fervor to repay all external debt. Ceauşescu’s legacy was an economy plagued by an inefficient industrial structure and an almost totally obsolete capital stock, a completely disorganized system of production and distribution, a collectivized agricultural sector, a decaying infrastructure, and a population whose living standards had been forced steadily down to a level where even basic necessities—food, heating, electricity, and medical attention—were hard to come by. There is little doubt that the initial obstacles to reform in Romania were far worse than those faced by the other reforming Eastern European countries.