The World Bank is ready to lend Romania an average of $1 billion per year if the government applies for financing for judicial reforms, education, healthcare, environment and pension systems. Government and World Bank representatives signed a Country Strategic Partnership document stipulating that the Bank will support Romania in developing certain projects. The document allows the government to borrow up to $1 billion per year. The document has to be endorsed by the World Bank's executive board.
The agreement with the World Bank broadens Romania's financing alternatives. European institutions such as EBRD, EIB and the Development Bank of Council of Europe promised the country up to Eu4 billion for infrastructure works. However, the key issue is not to find cheap financing but taming the budget deficit. Under the agreements with the IMF, Romania saw its fiscal deficit confined and the fiscal consolidation was mainly done by cutting expenses. The external balance has widened in the meantime reflecting: 1) local currency appreciation prompted by large capital inflows and 2) higher disposable incomes. Cutting the fiscal deficit to zero or even achieving small surplus would not help too much the CA gap. But it would definitely cut public investments and the developments of sectors such as the ones the World Bank wants to finance.
In particular, one-off operations such as the reform of the pension system, possibly to be financed out of privatisation deals, cannot be carried out under the fiscal arrangement confining the deficit; rather, the deals should be treated [both privatisation revenues and expenses aimed at pension system reform] separately from the general government budget for which the Fund's suggestion for 0.5%-of-GDP gap could be acceptable under certain conditions.
In statements that may be related to government's plans for a more flexible budgetary policy, the finance ministry said that the current agreement with IMF may be terminated this month.