Financial Management, Social Protection, and Financial Sector Strengthening
Bucharest, January 21, 2010 - The World Bank’s Board of Executive Directors approved an IBRD loan worth of €300 million for Romania, during its meeting on January 20. The loan is a single tranche development policy loan (DPL), named the Public Financial Management, Social Protection, and Financial Sector Strengthening Program.
This is the Second Development Loan (DPL2) to be disbursed to Romania, in a series worth € one billion. The program is part of international financial institutions’ support package amounting to €20 billion to Romania, started by the IMF, European Commission and World Bank in May 2009.
“The money will go to the Ministry of Public Finance, as budgetary support. According to the procedure, after the approval by the Bank Board, the loan agreement needs to be signed and then ratified by Romania, which is expected to happen very shortly,” said François Rantrua, WB Country Manager for Romania.
“The current program aims to support the Government of Romania’s structural reforms in three key areas: financial management, social protection, and financial sector strengthening,“ said Cătălin Păuna, senior economist of the World Bank in Bucharest. More exactly, the loan is meant to improve fiscal sustainability and management of public finances, including at sectoral level in health and education. In terms of social protection, the loan will contribute addressing the immediate needs of the poor and vulnerable, while ensuring more sustainability over the longer-term. Finally, the loan will contribute to strengthening contingency planning in, and the resilience of the financial sector.
The First Development Policy Loan (DPL-1), also worth €300 million, was approved by the Board of the Bank on July 16, 2009, ratified by Romania on September 1, 2009, and then released on October 20, 2009. The Development Policy Loan series is designed to be completed simultaneously with the IMF loan, but it depends on Romania meeting the agreed triggers. Among these were the new Pension Law, the Fiscal Responsibility Law, reforms in health and in education, the new unitary pay system, implementing legislation of the Unitary Pay Law, social assistance programs for the poor and vulnerable.
A World Bank team will visit Bucharest for a joint mission with the IMF and the EC on January 25 to February 8, to review Romania's economic performance and targets for 2011. During this mission, the World Bank will discuss with the Government the Third Development Policy Loan (DPL3) for € 400 million, which includes the key reform agenda related to state-owned enterprises and the passage of health co-payment law.