Summary

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 3.5 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.

Balance of Payments Assistance

Post-programme surveillance

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 first two 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 second mission further concluded that the medium term outlook presents vulnerabilities due to fiscal policies turned pro-cyclical in 2016. The report of the third mission will be published in this website once available.

Post-programme surveillance is complementary to the European Semester surveillance mechanism and the fiscal and macroeconomic surveillance frameworks.

Post-programme Surveillance Report, Spring 2017

Post-programme Surveillance Report, Spring 2016

European Semester

Fiscal

Macroeconomic surveillance

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.

Council Decision 2013/531/EU of 22 October 2013 providing precautionary Union medium-term financial assistance to Romania

Memorandum of understanding of 6 November 2013

Balance of Payments Assistance Programme. Romania, 2013-2015: Programme summary

Balance of Payments Assistance Programme. Romania, 2013-2015: Final report

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.

Romania: Statement of the European Commission and International Monetary Fund Staff Visit (MEMO/13/950)

Second Supplemental Memorandum of Understanding between the EU and Romania of 29 June 2012

First supplemental MoU of 27 December 2011

Memorandum of Understanding of 29 June 2011

Council Decision 2011/288/EU of 12/5/2011 providing precautionary EU medium-term financial assistance for Romania

Balance of Payments Assistance Programmes. Romania, 2009-2013: Final report

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.

Council Decision 2009/459/EC of 6/5/2009 providing Community medium-term financial assistance for Romania

Memorandum of Understanding of 23/6/2009

Supplemental MoU of 22/2/2010

Second Supplemental MoU of 02/08/2010

Third Supplemental MoU of 19/01/2011

Fourth Supplemental MoU 08/04/2011

Balance of Payments Assistance Programmes. Romania, 2009-2013: Final report

Key events

2017

23-26 May - 2nd Post-Programme Surveillance mission

2016

16-17 March - 1st Post-Programme Surveillance mission

2015

1 October - Beginning of Post-Programme Surveillance

30 September - End of 3rd Balance of Payments Assistance Programme, 2013-2015

26 June - Statement following the European Commission's staff mission to Romania

9 February - Statement on Romania

2014

12 June - Statement at the conclusion of the IMF-European Commission staff visit to Romania

4 April - Romania: Balance-of-Payments Assistance Programme. Mission report: 21 January - 4 February 2014 (staff working document)

4 February - Romania: Statement at the Conclusion of the IMF and EC Staff Visit - RO

13 January - Romania: Balance-of-Payments Assistance Programme. Mission report: 22 October – 5 November 2013 (staff working document)

2013

20 November - Romania: Balance-of-Payments Assistance Programme 2013-2015 (Occasional Paper)

6 November - Memorandum of Understanding

5 November - Statement of the European Commission and International Monetary Fund Staff Visit - RO

29 October - Council Decision 2013/531/EU of 22 October 2013 providing precautionary Union medium-term financial assistance to Romania

31 July - Statement by the IMF and the EC on Joint Discussions on a New Economic Programme for Romania 

19 July - Overall assessment of the two balance-of-payments assistance programmes for Romania, 2009-2013 - RO

29 January - Romania: Statement of the IMF and EC Review Missions

2012

06 - 14 November - Statement of the IMF and EC Staff Visit

12 September - Letter of Intent/ Memorandum of Economic and Financial Policies/ Technical Memorandum of Understanding

10 October - The Balance of Payments Programme for Romania. Second Review - Spring 2012 (Occasional paper)

14 August - Statement by the IMF, EC and WB on the Review of Romania’s Economic Program

29 June - Second Supplemental Memorandum of Understanding between the EU and Romania

8 June – Letter 0f Intent/ Memorandum of Economic and Financial Policies/ Technical Memorandum of Understanding

9 May - Statement by the WB, EC, and the IMF on the Review of Romania’s Economic Program

27 April - Joint press release by the IMF and EC Missions in Romania

28 February – Letter of Intent/ Memorandum of Economic and Financial PoliciesTechnical Memorandum of Understanding

5 February - Statement by the WB, EC and IMF on the Review of Romania’s Economic Programme

2011

22 December - The Balance of Payments Programme for Romania. First Review - Autumn 2011 (Occasional Paper)

7 November - Statement by the EC and IMF on the Review of Romania’s Economic Program

1 August - Statement by the EC and IMF on the Review Mission to Romania

29 June - The European Commission and Romania sign Memorandum of Understanding (MoU) on EUR 1.4 billion precautionary balance-of-payments assistance

9 May - European Commission Staff Statement after a joint mission with the IMF and the World Bank to Romania

24 March - Romania receives €1.2 billion in Balance of Payments Support

18 March - European Commission and IMF welcome the continued support by the parent banks of the largest foreign-owned banks for Romania

17 March - €4.6 billion bond issued to assist Ireland and Romania

8 February - European Commission Staff Statement after a joint mission with the IMF and the World Bank to Romania

2010

3 November - European Commission Staff Statement after a joint mission with the IMF and the World Bank to Romania

22 September - Commission pays € 1.15 billion in Balance of Payments support to Romania

4 August - Commission concludes that conditions for third disbursement of the EU BoP assistance of €1.2 bn have been met

22 July - Press statement. Commission and IMF welcome the reaffirmed support of parent banks to their Romanian affiliates

10 May - Statement after joint mission to Romania

11 March - EU disburses second instalment of €1 billion Community financial assistance to Romania

25 February - Signature of Supplemental Memorandum of Understanding

28 January - EU Balance of payments programme for Romania

2009

18 November - European Banking Coordination Initiative Meeting for Romania

28 July - Commission pays first instalment of € 1.5 billion in balance-of-payments support to Romania

23 June - Commission and Romania sign Memorandum of Understanding (MoU) on €5 billion balance-of-payments loan

21 April - Commission asks Council to provide a medium-term loan to Romania as part of coordinated multilateral financial assistance

25 March - EU intends to provide medium-term financial assistance to Romania of up to € 5 billion