Disagreeing with the IMF: A View from the Romanian Central Bank

Conventional discussions of the IMF’s presence in Romania – including the 3 Stand-By Agreements since 2009 - typically focus on the politics of disagreement between governments and the IMF. Yet the Romanian central bank has made policy decisions that run contrary to IMF advice. The paper reflects on why it may be easier for the central bank to have policy autonomy. It shows that the central bank and the IMF have together constructed, and continuously reproduce, the fiction that the central bank controls monetary and financial conditions in the economy through its inflation-targeting regime. This fiction is useful for the central bank to deny responsibility for domestic economic developments, and for the IMF to frame balance of payment crises as crises of state intervention in the economy. Despite the IMF’s new ‘Finance Matters’ paradigm, Stand-By agreements are constructed to ‘correct’ government failures, rather than to engage with the pressing challenges that the central bank is facing in managing a New Member State with no room for capital controls, with a foreign owned banking sector that engages in regulatory arbitrage and short-term yield pursuit and with a growing presence of volatile portfolio investors that may exit rapidly when global liquidity conditions tighten. It is against these serious (and by no means unique) constraints that the central bank decided to ignore the IMF’s advice on the conduct of monetary policy. The paper reflects on the implications for re-thinking the politics of the IMF’s ‘sympathetic interlocutors’