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Romania: Staff Report for the Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund. European Dept.
Published Date:
March 2015
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Fund Relations

As of January 31, 2015

Membership Status Joined 12/15/72 Article VIII

General Resources Account

SDR million% Quota
Quota1,030.20100.00
Fund holdings of currency2,166.95210.34
Reserve Tranche Position0.000.00

SDR Department

SDR million% Allocation
Net cumulative allocation984.77100.00
Holdings13.441.36

Outstanding Purchases and Loans

SDR Million% Quota
Stand-By Arrangements1,136.75110.34

Financial Arrangements

TypeApproval DateExpiration DateAmount Approved (SDR million)Amount Drawn (SDR million)
Stand-By09/27/1309/26/151,751.340.00
Stand-By03/31/1106/30/133,090.60.00
Stand-By05/04/0903/30/1111,443.0010,569.00
Stand-By07/07/0407/06/06250.000.00
Stand-By10/31/0110/15/03300.00300.00
Stand-By08/05/9902/28/01400.00139.75
Stand-By04/22/9705/21/98301.50120.60
Stand-By05/11/9404/22/97320.5094.27
Stand-By05/29/9203/28/93314.04261.70
Stand-By04/11/9104/10/92380.50318.10

Projected Payments to Fund (Expectations Basis)1

(SDR million; based on existing use of resources and present holdings of SDRs):

Forthcoming
20152016201720182019
Principal1,040.6396.13
Charges/interest8.250.690.490.490.49
Total1,048.8796.810.490.490.49

Exchange Rate Arrangement

Romania has accepted the obligations of Article VIII and maintains an exchange rate system free of restrictions on the making of payments and transfers on current international transactions except for those maintained solely for the preservation of national or international security in accordance with UNSC resolutions and that have been notified to the Fund under the procedure set forth in Executive Board Decision No. 144-(52/51). The de jure exchange rate arrangement is managed floating.

Technical Assistance

Capacity building in Romania has been supported by substantial technical assistance from multilateral agencies and bilateral donors. The Fund has provided support in a number of areas with about 20 technical assistance missions and expert visits since 2012. Expert Fund assistance has focused in recent years mostly on structural fiscal reforms, in particular modernizing tax administration, strengthening public financial management, and reviewing tax policy options. Technical assistance to the National Bank of Romania focused on upgrading contingency planning, dealing with non-performing loans, and reviewing monetary and exchange rate policy tools.

DatePurposeDepartment
Tax Administration
March–April 2012Assistance in strengthening the capacity of the National Agency for Fiscal Administration (ANAF).FAD
July–August 2012Advice on organizational reforms, strategic direction, plan for restructuring of ANAF and implementation of a compliance strategy.FAD
August–September 2012Follow-up on the reorganization of ANAF.FAD
November–December 2012Follow-up with ANAF, particularly on the anti-fraud unit.FAD
March–April 2013Training to improve high net wealth individual compliance.FAD
April, September, November 2013, January 2014Follow-up with ANAF.FAD
April 2014Assistance to ANAF on pilot structural compliance project targeted at undocumented labor. Training on payroll audit.FAD
April 2014Stock-taking on assistance and identification of future TA focus: compliance risk management, reorganization of ANAF, pilot projects.FAD
January–February 2015Follow-up and training to improve high net wealth individual compliance.
Tax Policy
September 2013Assistance with strengthening the property tax and natural resource tax regime.FAD
September 2014Follow-up assistance with creating a new natural resource tax regime.FAD
Public Financial Management
March 2012Assistance in setting up commitment control and fiscal reporting sytems.FAD
November 2012Follow-up assistance in setting up commitment control and fiscal reporting sytems, in particular methodologies and functionalities.FAD
April 2013Follow-up assistance in setting up commitment control and fiscal reporting sytems, including methodology to verify arrears of local government.FAD
December 2013Follow-up assistance in setting up commitment control and fiscal reporting sytems, including requirements from decentralization plans.FAD
February 2014Fiscal Transparency Evaluation.FAD
January 2015Follow-up assistance in setting up commitment control and fiscal reporting systems, review of public investment practices and program budgeting.FAD
Financial Sector Issues and Monetary Policy
November 2012Follow-up on program-related financial sector issues, including progress with contingency planning.MCM
October 2014Assessment of the monetary policy framework.MCM
Accounting and NPL
October 2013Assistance on how to achieve timely NPL write-off within the IFRS framework.MCM

Article IV Consultations

Romania is on a 24-month consultation cycle during the Stand-By Arrangement. The previous Article IV consultation was concluded by the Executive Board on September 28, 2012.

Safeguards Assessment

The update of the 2011 safeguards assessment, completed on January 10, 2014, found that the safeguards framework at the National Bank of Romania remains robust. The NBR continues to publish audited financial statements and maintains strong controls over foreign reserves management, government banking, and vault operations. The assessment recommended that the internal audits of foreign reserves data (a measure during both the 2009 and 2011 Stand-By Arrangements) be continued during the current program.

FSAP and ROSC

A joint IMF-World Bank mission conducted an update assessment of Romania’s financial sector as part of the Financial Sector Assessment Program (FSAP) during November 3–14, 2008. The Financial Sector Assessment Report (FSSA) was discussed at the Board in April 2009.

A recent pilot of the IMF’s new Fiscal Transparency Evaluation took place in February 2014 and the findings were published in March 2015. It assessed the government’s fiscal reporting, forecasting, and risks management practices against the IMF’s revised Fiscal Transparency Code.

Resident Representative

The Fund has had a resident representative in Bucharest since 1991. Mr. Guillermo Tolosa assumed the post of regional resident representative in July 2013.

Relations with the World Bank

The current World Bank Group Country Partnership Strategy (CPS) for Romania, covering the period 2014–7, was presented to the Board on May 22, 2014. The strategy aims at reducing poverty and promoting shared prosperity. The CPS is built on three pillars; (i) Creating a 21st Century Government, with focus on a well-functioning public administration, effective in its service delivery and with an improved quality of public expenditure. (ii) Growth and Private Sector Job Creation, seeking sustainable poverty mitigation and shared prosperity through improvements in the business environment and SOE governance (especially in energy and transport), promoting innovation, and furthering the digital agenda and competitiveness, and (iii) Social Inclusion, a key to the EU’s Europe 2020 Agenda, with a special focus on the Roma community.

i. International Bank for Reconstruction and Development (IBRD)

Romania’s portfolio consists of seven active projects that amount to US$2.4 billion, complemented by four country-executed trust funds totaling US$10.7 million, a program of 21 Reimbursable Advisory Services worth US$48.3 million, and five (Bank-funded) analytical pieces:

  • The lending portfolio includes seven investment projects, including the recently approved Health Sector Reform Project (US$339 million), the Results-Based Project for Social Assistance System Modernization (US$710 million), an Integrated Nutrient Pollution Control Project (US$68 million), a Judicial Reform Project (US$130 million), and a Revenue Administration Modernization Project (US$92 million). The Portfolio also includes a budget support operation in support of Fiscal Effectiveness and Growth (US$1035 million) to support Romania’s goals of: (i) strengthening fiscal management (debt management and the quality of public spending) and SOE performance; and (ii) improving the functioning of property, energy, and capital markets.

  • The country-executed trust funds focus on (i) afforestation; (ii) nutrients pollution control; (iii) policymaking for people with disabilities; and (iv) monitoring and evaluation of policy making.

  • Among the 21 Reimbursable Advisory Services (RAS), a few provide support to the government in improving the public sector management for efficient and effective service delivery by: (i) shifting towards a results-driven culture, improved policy prioritization, implementation, and coordination, (ii) strengthening public investment management, (iii) introducing performance management systems for EU funds, and (iv) supporting the strategic activities to meet the EU funding conditions, for education, social inclusion, active aging (EU 2014–20 program budget).

  • Analytical work (Bank-funded) includes a Programmatic Public Expenditure Review, including wage bill planning, and a Decentralization Report examining ways to improve the system of local service provision. Other Bank-funded analytical work includes advice on the Mining Sector Strategy, and a Financial Sector Note.

Three new projects are under preparation: a Secondary Education (FY2015); a Social Inclusion and Basic Services Project (FY2016, in the early preparation stage); and a Second Fiscal Effectiveness and Growth Development Policy Loan (FY2016).

ii. International Finance Corporation (IFC)

IFC’s current committed portfolio is US$613 million, the fifth largest in the Europe and Central Asia region after Turkey, Russia, Ukraine and Serbia. IFC has played an active crisis response role in Romania, investing US$1.1 billion of its own funds and mobilizing an additional US$277 million in 36 projects since July 2009, with particular support provided to the financial, renewable energy, and health sectors. IFC has implemented 26 Advisory Services projects in Romania since 1990 in a variety of sectors.

Statistical Issues

As of February 18, 2015
I. Assessment of Data Adequacy for Surveillance
General: Data provision is adequate for surveillance. The quality of the national accounts, price, fiscal, and balance of payments data is adequate.
National accounts: Quarterly and annual national accounts statistics are produced by the National Institute for Statistics (INS) using the European System of Accounts 2010 (ESA 2010). Estimates are methodologically sound and are reported to the Fund on a timely basis for publication in the International Financial Statistics (IFS). Provisional and semi-final versions are disseminated in the Statistical Yearbook and other publications, as well as on the web (www.insse.ro).
Inflation: The Consumer Price Index is subject to standard annual re-weighting, and is considered reliable. In January 2004, the INS changed the coverage of the Producer Price Index to include the domestic and export sectors.
Labor market: Labor market statistics are broadly adequate. The definition used for employment is consistent with ESA 2010.
Public finances: Annual GFS data for the general government sector, including public corporations operating on a non-market basis, are reported on an accrual basis derived from cash data using various adjustment methods. Tax revenues are adjusted using the time-adjusted cash method; expense data are adjusted using due-for-payments data; and interest payments are calculated on an accrual basis. Accrual data are also available on a quarterly basis three months after the end of each quarter. EUR receives monthly cash budget execution data. Consolidated data on general government operations are reported for inclusion in the GFS Yearbook.
Monetary and financial data: The National Bank of Romania (NBR) reports monetary and financial statistics on a regular and timely basis for publication in the IFS. Since December 2004, the NBR reports monetary data to STA using the Standardized Report Forms (SRFs). The data are being published in the IFS Supplement, beginning September 2006. Romania’s data and metadata for financial soundness indicators are posted on the IMF’s website (http://www.imf.org/external/np/sta/fsi/eng/cce/index.htm).
Balance of payments: The NBR routinely reports quarterly and annual external sector statistics to the Fund in a timely fashion. Since September 2014 the authorities implemented the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6), in line with other European countries. Romania also participates in the IMF’s Coordinated Portfolio Investment Survey (CPIS) and Coordinated Direct Investment Survey (CDIS).
II. Data Standards and Quality
Romania is a subscriber to the Fund’s Special Data Dissemination Standard (SDDS) since August 4, 2005.IMF Reports on the Observance of Standards and Codes (ROSC) have been published as Country Report No. 01/206, 02/254 and 03/389.
Romania: Table of Common Indicators Required for Surveillance(As of February 18, 2015)
Date of latest observationDate receivedFrequency of Data6Frequency of Reporting6Frequency of Publication6
Exchange RatesMay 2014Jun 2014D and MD and MD and M
International Reserve Assets and Reserve Liabilities of the Monetary Authorities1May 2014Jun 2014D and MW and MM
Reserve/Base MoneyApr 2014Jun 2014D and MW and MM
Broad MoneyApr 2014Jun 2014MMM
Central Bank Balance SheetApr 2014Jun 2014MMM
Consolidated Balance Sheet of the Banking SystemMay 2014Apr 2014MMM
Interest Rates2Mar 2014May 2014MMM
Consumer Price IndexMay 2014Jun 2014MMM
Revenue, Expenditure, Balance and Composition of Financing3 – General Government4Apr 2014Jun 2014MMM
Revenue, Expenditure, Balance and Composition of Financing3 – Central GovernmentApr 2014Mar 2014MMM
Stocks of Central Government and Central Government-Guaranteed Debt5Q4 2013Mar 2014QQQ
External Current Account BalanceQ1 2014Jun 2014MMQ
Exports and Imports of Goods and ServicesMar 2014May 2014MMM
GDP/GNPQ1 2014May 2014QQQ
Gross External DebtQ4 2013Mar 2014QQQ
International Investment Position7Q1 2014Jun 2014QQQ

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic non-bank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds), and state and local governments.

Including currency and maturity composition.

Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I); and not available (NA).

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic non-bank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds), and state and local governments.

Including currency and maturity composition.

Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I); and not available (NA).

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

This schedule presents all currently scheduled payments to the IMF, including repayment expectations where applicable and repayment obligations otherwise. The IMF Executive Board can extend repayment expectations (within predetermined limits) upon request by the debtor country if its external payments position is not strong enough to meet the expectations without undue hardship or risk.

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