IMF Romania mission chief Erik de Vrijer, said at the end of his August visit that Romania will not get a letter of intent for a new loan unless the public companies of Oltchim and Transgaz go private.In other words, IMF has been blackmailing the Romanian government: either you sell those companies or you won’t see a dime. In the case of Oltchim, going private is a good thing for Romania has the company has registered a € 165 Mil loss in the last three years alone. These losses were covered with money from the state budget, meaning our money. By doing some simple math, we can see that each Romanian citizen made an early payment to Oltchim of 3 euros. By way of comparison, we can easily see that during the last three years each Romanian has received form Petrom nearly 4 euros in contributions to the state budget. Therefore, from this point of view, the privatisation of underachieving companies becomes a must.
However, there is also a problem. Economy is governed by the unwritten rule of supply and demand: when the demand is bigger the price grows, whereas when the supply increases, the prices decreases. When IMF put their foot down and say “Sell NOW”, basically the supply increases a lot. Therefore, any investor interested in Oltchim will make a smaller bid because they know the State MUST sell. Instead of making a sale for 10 ROL, we will be making a forced sale for 2-3 ROL.
I believe this to be a harsh lesson for Romania and for our political classes. The crisis is still rampant, and delaying any necessary measures is a costly alternative. Either we do what must be done when it must be done, or we risk of being scolded by Romania’s creditors who will force us to do the right thing, but under their terms, who may or may not be in our best interest.
