FT blogs: UniCredit chief economist says Romania needs the stick of a strict IMF deal to force reform pace

Romania needs a further deal with the International Monetary Fund (IMF) to enforce the reforms necessary for growth, according to UniCredit economist Dan Busca's article, published on the Financial Times blogs. “Romania needs a third IMF agreement to maintain some sort of reform momentum. It should lay down a strict schedule for privatising, or shutting down, the biggest loss-making SOEs,” writes Busca for FT. The article recounts the rather checkered history of privatizations in Romania and the compromise deal with the IMF to instal private sector management in state-owned enterprises (SOEs). The management schemes have also encountered problems, with the new private sector executives running into difficulties when setting out business plans. SOEs have rejected some business plans and private sector managers have left their positions within a few months of starting. The woeful absorption rate of EU funds is also highlighted, just 13.4 per cent at the end of April 2013, according to Dan Busca, a figure which he describes as “appallingly low.” Busca argues that without a-big-stick-waving IMF deal, Romania will fall off the reform wagon. The EC alone, claims Busca, will not have the firepower to force the program of reform in Romania. “Without reducing public sector wastage, Romania faces either slow growth or excessive budget deficits, neither of which is of benefit to medium or long term stability,” writes Dan Busca for FT. Read the FT blog Romania needs IMF supervision to boost growth editor@romania-insider.com.