Romania is under post-programme surveillance due to disbursements under the first balance of payments financial assistance programme (2009-2011). The outstanding amount is EUR 2.35 billion. The second (2011-2013) and third (2013-2015) BoP programmes were treated as precautionary and no disbursements were made. All financial assistance programmes were jointly run with the International Monetary Fund (IMF) and supported by the World Bank. The IMF loan, which had a shorter maturity, was already fully repaid.
Post-programme surveillance (PPS) started on 1 October 2015, with the end of the third balance of payments (BoP) programme. It is linked to the loans under the 2009-2011 BoP programme, when disbursements of €5 billion were made. €2.35 billion are currently outstanding.
PPS involves a regular flow of information to the European Commission and semi-annual visits to Romania to assess the economic, fiscal and financial situation of the country until at least spring 2018, when more than 70% of the loan under the first programme is expected to be repaid. Romania is also required to discuss new major policy intentions with the European Commission, and with the Economic and Financial Committee in case the Commission considers these have the potential to jeopardise the repayment of the financial assistance.
Surveillance missions took place 23-26 May 2016, 16-17 March 2017 and 8-10 November 2017. The missions concluded that the overall debt level and government financing performance suggest that risks related to the repayment of the debt to the EU are very low. The third mission further concluded that economic growth is expected to remain robust but the fiscal policy is strongly pro-cyclical. The banking sector remains well-capitalised and asset quality has further improved, but risks from potential changes to the legal framework could re-emerge.
Post-programme surveillance is complementary to the European Semester surveillance mechanism and the fiscal and macroeconomic surveillance frameworks.
BoP precautionary assistance programme 2013 - 2015
The third EU BoP programme was formally agreed in October 2013 and expired in September 2015. It ran in parallel with an International Monetary Fund (IMF) stand-by arrangement (SBA). As with the 2011-13 BoP programme, the 2013-15 programme was treated as precautionary. It was not drawn upon.
The precautionary assistance by the EU amounted to €2 billion, while the IMF contributed up to special drawing rights, an international reserve asset, created by the IMF to supplement its member countries’ official reserves) 1.75 billion (around €2 billion) on the basis of an SBA. The aim of the programme was to support Romania in consolidating macroeconomic, fiscal and financial stability, increasing the resilience and growth potential of its economy, enhancing its administrative capacity, reforming the tax administration, improving public financial management and restructuring state-owned enterprises. Despite some progress in several policy areas, no BoP programme review mission could be finalised during the programme.
The Commission recommends that the Romanian authorities step up the efforts to implement the jointly agreed policy measures within the balance of payments programme.
BoP precautionary assistance programme 2011 - 2013
In February 2011 a follow up joint EU/IMF precautionary financial assistance program was requested to support the re-launch of economic growth with a focus on structural reforms, while improving fiscal sustainability and consolidating financial stability.
On 12 May 2011, the Council of the European Union adopted a decision to make available a precautionary medium-term financial assistance of up to €1.4 billion for Romania. EU assistance for Romania under the BoP facility was provided in conjunction with IMF support through a stand-by arrangement (SBA) in the amount of SDR3.090 billion (about €3.5 billion, 300% of Romania's IMF quota), approved on 25 March 2011, which the authorities also treated as precautionary. The World Bank continued to provide earlier committed support of €400 million under its development loan programme and of €750 million of results based financing for social assistance and health reforms.
BoP assistance programme 2009 - 2011
The sudden increase in risk aversion during the financial crisis caused market participants to become increasingly concerned by Romania's large internal and external imbalances in the form of a 5.7% of GDP budget deficit and an 11.6% of GDP current account deficit.
As a result, capital inflows fell and the exchange rate of the RON against the euro depreciated by more than 30% between August 2007 and January 2009. Consequently, the Romanian authorities applied in spring 2009 to the EU, the IMF and other international financial institutions for financial assistance.
In May 2009 an agreement was reached to provide multilateral financial assistance to Romania with an overall amount of € 20 billion, consisting of the following contributors
- European Community, €5 billion under the BoP assistance programme
- International Monetary Fund, SDR 11.44 billion (around €12.95 billion) under an IMF Stand-by arrangement approved on May 4 2009, amounting to 1,110.77 % of Romania's quota
- The World Bank, €1 billion under a development policy loan
- The EIB and the EBRD, €1 billion combined
The EU financial assistance has been disbursed in 5 instalments
- €1.5 billion released 27 July 2009
- €1 billion released 11 March 2010
- €1.15 billion released 22 September 2010
- €1.2 billion released 24 March 2011
- €150 million released 22 June 2011
The average interest rate on the amounts disbursed by the European Commission was around 3%, with repayments starting in 2015 and expected to be completed by 2019.
8-10 November - 3rd Post-Programme Surveillance mission
16-17 March - 2nd Post-Programme Surveillance mission
23-26 May - 1st Post-Programme Surveillance mission
1 October - Beginning of Post-Programme Surveillance
9 February - Statement on Romania
4 April - Romania: Balance-of-Payments Assistance Programme. Mission report: 21 January - 4 February 2014 (staff working document)
13 January - Romania: Balance-of-Payments Assistance Programme. Mission report: 22 October – 5 November 2013 (staff working document)
20 November - Romania: Balance-of-Payments Assistance Programme 2013-2015 (Occasional Paper)
6 November - Memorandum of Understanding
29 January - Romania: Statement of the IMF and EC Review Missions
06 - 14 November - Statement of the IMF and EC Staff Visit
10 October - The Balance of Payments Programme for Romania. Second Review - Spring 2012 (Occasional paper)
22 December - The Balance of Payments Programme for Romania. First Review - Autumn 2011 (Occasional Paper)
25 February - Signature of Supplemental Memorandum of Understanding
28 January - EU Balance of payments programme for Romania