World Bank Concludes Development Policy Program Mission in Romania, January 25 – February 8

February 8, 2011

BUCHAREST, February 8, 2011 – A World Bank team headed by Sudharshan Canagarajah, Lead Economist in the Bank’s Europe and Central Asia Region, visited Romania on January 25 – February 8, together with the International Monetary Fund (IMF) and the European Commission (EC), to discuss progress and future steps regarding the medium-term structural measures supporting the Romanian government’s reform agenda and the acceleration of economic growth carried out under the Development Policy Program. The mission also discussed the pillars of the next multilateral support program for Romania.

The Bank team had meetings with Romanian authorities as well as representatives of political parties, the business community, trade unions, civil society, and academia. They discussed the economic reform program supported by the World Bank in the context of the three-part Development Policy Program in key areas: improving public sector efficiency, protecting the poor and vulnerable, and strengthening the functioning of the financial sector.

“Over the last two years, the IMF, EC, and World Bank have assisted the Government of Romania in implementing a bold macroeconomic stabilization program in the context of the global crisis,” said Sudharshan Canagarajah, Lead Economist in the World Bank’s Europe and Central Asia Region. “The World Bank is pleased with the progress in the implementation of the reforms measures agreed and the results achieved to date. The economy has been stabilized, internal and external imbalances have been reduced, market confidence has been reinstated, and the economy is poised to regain its growth momentum.”

In this context, over the last two weeks, the IMF, EC, and World Bank have worked with the Government on a successor program to help consolidate the gains achieved so far, and to lay the foundation for reviving a robust, sustainable, and equitable growth in Romania by better mobilizing domestic and foreign resources available. Over the next two years, the new program deepens the measures of fiscal consolidation and spending efficiency launched in the ongoing program, while implementing key structural reforms necessary to help with reviving and balancing growth.

The World Bank will contribute to the new program through several instruments. First, the Bank will provide Euro 400 million this year as part of the Development Policy Loan (DPL) 3, which focuses on measures to improve expenditure efficiency and fiscal consolidation in the areas of budgeting, public pay, health, education, and social assistance. Second, two results-based operations, totaling Euro 750 million, will be launched, deepening reforms in social assistance and health, complementing the agenda supported by the IMF and EC in these areas. Support is also offered to the Government to set up an institutional framework to coordinate and monitor reforms at the center of government, in the form of a grant of US$430,000 and the associated technical assistance.

Third, the World Bank will carry out other initiatives to help with the effort to restore growth. The Bank will support the Government to implement the recommendations of the first six functional reviews carried out in several sectors of the public administration, with assistance from the EC, with the aim to improving allocation efficiency and service delivery in the public sector. Six other functional reviews are now under way. Another area of support is through analytical work carried out with researchers and institutions in Romania on factors that constrain growth and development in the areas of business environment, labor markets, absorption of EU funds, innovation and competitiveness, and fiscal risks. This work was launched in December 2010, and we expect to discuss the results of key sectoral analysis by April 2011.

The World Bank has played a significant role in supporting Romania's transition and EU integration aspirations. Between 1991 and 2010, the World Bank supported over 55 operations in Romania, with a total commitment of more than US$6 billion. Currently, the Romania World Bank portfolio consists of 12 active projects, with a corresponding net commitment of US$1.385 billion, and several analytical and advisory activities.

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