Romania secures €1 billion loan from the World Bank
Last month it was announced that the World Bank had approved a loan of €1.0 billion to Romania for a Development Policy Loan (DPL) with a Deferred Drawdown Option (DPL DDO) which "is a contingent credit line that allows the borrower to rapidly meet its financing requirements following a shortfall in resources due to adverse economic events such as a downturn in economic growth or unfavourable changes in commodity prices or terms of trade." (The World Bank)
The Romanian government said that the loan will be used to consolidate fiscal reserves, act as a buffer against external financial shocks, and will go towards funding Romania's gross financing needs. This loan is in addition to the two year precautionary agreement, signed in March 2011, with the International Monetary Fund (IMF) and the European Union, which "saw the IMF finance €13.0 billion, while the European Commission added €5.0 billion". (New Europe) The European Bank for Reconstruction and Development (EBRD) has also contributed €1.0 billion. Previously Romania has taken out loans to replenish foreign currency reserves of the National Bank of Romania (NBR).
"In May 2009 an agreement was reached to provide multilateral financial assistance to Romania with an overall amount of € 20 billion, consisting of the following contributors:
- European Community, € 5 billion under the balance-of-payments assistance programme
- International Monetary Fund, SDR 11.44 billion (around € 12.95 billion) under an IMF Stand-by arrangement approved on May 4 2009, amounting to 1,110.77 percent of Romania's quota
- The World Bank, € 1 billion under a Development Policy Loan
- The EIB and the EBRD, € 1 billion combined.
The EU financial assistance has been disbursed in 5 installments:
- € 1.5 billion released 27 July 2009
- € 1 billion released 11 March 2010
- € 1.15 billion released 22 September 2010
- € 1.2 billion released 24 March 2011
- € 150 million released 22 June 2011
The average interest rate on the amounts disbursed by the European Commission is around 3%, with repayments starting in 2015." (European Commission: Economic and Financial Affairs)
Last Updated (Wednesday, 25 July 2012 12:12)