Fitch said the Romania’s proposed IMF facility for 12.95 bln euro stand-by arrangement backed by a further 7 bln euro from the European Commission and multilateral institutions should shore up the country’s external finance and reduce the risk of a damaging financial crisis, provided the authorities keep to their policy commitments.
Fitch downgraded Romania by two notches, from ‘BBB’ to 'BB+' in November 2008, taking the country off the investment-grade status.
"Fitch views Romania's proposed IMF programme as supportive for its ratings as it should help to meet the country's sizeable external financing needs and provide a breathing space to rebalance the economy," said Andrew Colquhoun, Director in Fitch's Sovereigns group.
"Nevertheless Romania faces a challenging economic and financial outlook and it will be vital for the authorities to keep to the attached policy conditions," Colquhoun added.
However, the ratings continue to benefit from low general government debt of just 20% of GDP by end-2008, while a lack of sovereign eurobond maturities in 2009 reduces refinancing risk this year.
Previously rapid growth in domestic and external borrowing has left Romania heavily exposed to ongoing global de-leveraging. Credit to the domestic private sector grew at annual rates of around 60% in 2006 and 2007, funded partly by money from foreign parents which own around 90% of Romania's banking system.
Credit growth slowed to 34% in 2008 as the credit crunch raised the cost of funds for foreign parents and diminished investor risk appetite.
Net external debt rose to a projected 29% of GDP by end-2008, from just 7% at end-2005. The current account deficit was 12.2% of GDP in 2008, as strong credit growth fuelled domestic demand and drew in imports.
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