WASHINGTON, June 22 The IMF on Friday warned
that Romania's banking system is vulnerable to Europe's debt
crisis and urged Bucharest to strengthen its financial sector
oversight and crisis management framework.
The International Monetary Fund made the comments after it
completed a fifth review of Romania's economic performance,
which would make an additional $651.3 million available to the
country under a 24-month stand-by arrangement.
Romania, the European Union's second-poorest member, wants
to continue treating the facility as precautionary and has no
intention of drawing the funds.
"Romania's banking system remains vulnerable to spillovers
from elsewhere in Europe owing to close financial sector ties,"
the IMF said on completion of the review which brings to $3.35
billion the total resources available to Romania under the
The fund said Romanian banks have good capital adequacy and
provisions were high, but non-performing loans continue to rise.
"Monetary conduct also needs to remain cautious and exchange
rate policy should limit foreign exchange intervention as long
as the impact of a weakening currency on prices and balance
sheets remains modest," the IMF said.
Romania's economic growth was projected to pick up in the
second half of the year, with inflation remaining under control
and the fiscal and external positions continuing to improve.
"However, with external downside risks looming large, a
steadfast implementation of all program commitments, including
structural measures, is needed to preserve macroeconomic
stability and boost potential growth," the IMF said.
"The budget deficit target has been eased slightly to allow
for some countercyclical spending. Strict spending discipline
will nonetheless be required to meet the revised target," the
(Reporting By Lucia Mutikani; Editing by Andrew Hay)