Romania: Request for a Stand-By Arrangement

Stand-by Arrangement: Romania successfully completed in June 2013 a 27-monthStand-By Arrangement (SBA), including a three-month extension, equivalent toSDR 3,090.6 million (€3.4 billion, 300 percent of quota). The authorities have requesteda successor 24-month SBA with proposed access of SDR 1,751.34 million (about€2 billion, 170 percent of quota). The first tranche of SDR 194.7 million would be madeavailable upon program approval. The authorities intend to treat the SBA asprecautionary and have also requested support from the European Union (€2 billion),while €1 billion remains available under a World Bank policy loan.

Program objectives: Since the 2008 global financial crisis, Romania has madesignificant progress in reducing macroeconomic imbalances and rebuilding fiscal andfinancial buffers. However, Romania remains vulnerable to external shocks, in particularuncertainties in the euro area as well as global volatility in capital flows to emergingmarkets. The new SBA would provide a valuable policy anchor and support Romania'scomprehensive economic program for 2013–15 to maintain sound macroeconomicpolicies and financial sector stability and continue structural reforms to enhancegrowth prospects.

Program conditionality: Romania's cumulative access, net of scheduled repurchases,would be exceptional given its outstanding credit to the GRA arising from purchasesunder the 2009–11 SBA. The program calls for continued gradual fiscal adjustment andallows for short-term measures in support of domestic demand. Structural reformsbuild on the previous program with a focus on arrears reduction. Conditionality isfront-loaded via a number of macro-critical structural benchmarks. An Ex PostEvaluation is envisaged for around end-2013 and an update of the SafeguardsAssessment by the time of the first review.

Staff views: Staff supports the authorities' request for a new SBA. A precautionaryFund-supported program would foster policy discipline and provide a reserve buffer,while helping to catalyze support for difficult structural reforms and put Romania on afirm path toward exiting from Fund support.