UPDATE 1-IMF signs off on latest review of Romania aid program

Wed Mar 26, 2014 2:56pm EDT

(Adds IMF comment, details)

WASHINGTON/BUCHAREST, March 26 (Reuters) - The International Monetary Fund approved the first and second reviews of Romania's aid deal on Wednesday, after weeks of bickering over taxes between the government and the president threatened to derail years of deficit-cutting reforms.

The IMF sign-off means Romania is on track with the conditions of its 4-billion-euro ($5.5 billion) aid deal from the Fund and European Commission, the country's third since 2009.

Centre-right President Traian Basescu had previously refused to approve the deal review because the leftist government had negotiated with the IMF an additional excise tax on fuels, which he opposed arguing it would choke the economy.

While the tax will still be enforced, Basescu threw his weight behind the deal after a split in the European Union state's ruling coalition threatened the programme and unnerved investors.

"Romania is making good progress under the precautionary standby agreement," the IMF said in a statement, adding it will now make 436 million euros available to Romania.

"However, the economy and the financial sector remain vulnerable to shocks. Steadfast program implementation is essential to preserve macroeconomic stability and policy buffers in this election year."

Romania, the EU's second-poorest state, does not plan to draw on the funds from its latest IMF deal. But their availability provides reassurance for foreign investors concerned about fiscal slippage before a presidential election and a European Parliament election later this year. ($1 = 0.7254 Euros) (Reporting by Anna Yukhananov and Luiza Ilie; Editing by Sonya Hepinstall)

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