Supporting Romania's Reform Agenda

Even though Romania narrowed the gap with European Union economies over the last fifteen years, cracks in its economy broke wide open when the financial crisis hit. Years of overspending both by the private and public sector resulted in runaway deficits. Government budgets were awash in red ink, in part because of expanded entitlement programs and pensions, but also due to inefficient investing. Yet government services were of uneven quality and did not adequately provide for the country's poorest.

Romania felt the crisis acutely as revenues plummeted and the economy contracted. And although the country is recovering, many Romanians still struggle to make ends meet, says a minimart shopkeeper on a quiet side street off a loud Bucharest boulevard. "People are still buying less, and they only buy what they need," she says.

To right the economy and reform public sector programs in the midst of the financial crisis requires political will but also a roadmap and assistance. That is why the World Bank, the International Monetary Fund and the European Commission in 2009 put together a EUR 20 billion package to support the government as it enacted tough fiscal measures, including difficult and unpopular wage and pension cuts, while working to insure a safety net for the poorest.

The government also embarked on structural reforms. It started to change the way it finances education—to make it fairer and more efficient. It took a look at its social protection programs to find out ways to reduce waste and fraud and better target the vulnerable. And it began to tackle its fifty-year old health care system—one that relies heavily on use of hospitals.

Reforms and fiscal discipline paid off. Romania is one of the EU member states that brought its deficit under control and stabilized its economy after the global crisis. By 2011, Romania's economy started to recover but more work is needed to put the country back on the path to sustainable growth, reassure investors and move closer to European Union targets.

To support these reforms, the World Bank offered Romania an additional precautionary loan of EUR 1 billion in June 2012. The money is available for three years on the condition that Romania stick to its macroeconomic and reform programs.

The loan-a Development Policy Loan with a Deferred Drawdown Option, or DPL-DDO—supports three sets of reforms. The first aims to make public spending and revenue-raising more efficient, the second to make state-owned energy and transportation companies solvent and competitive. The third is to make public health care more efficient but also more available to the poorest, thanks to preventive care and health promotion programs.

The job of changing the system and people's attitudes is huge. A young woman standing outside a Bucharest hospital Emergency Room is in line to see the doctor who's shuttling back and forth between patients on stretchers.

The woman is here chatting with a friend on a Thursday night among the critically ill to have a small bandage changed. A family doctor could easily perform this simple procedure, if only she had one. The woman sees no need because the emergency room is handy, and it's free.

ER doctor Ileana Latis says," A lot of time patients come here when they could be treated by a family doctor. But for one reason or another, they choose to come here."

Those reasons include the lack of family physicians and primary care facilities, and the expense of buying medicines at the pharmacy. These are all issues Romania will be tackling over the next three years and beyond.