Technical Assistance and Critical Imports Loan
   Report No: ; Type: Report/Evaluation Memorandum ; Country: Romania; Region: Europe And Central Asia; Sector: Public Sector Management
                                    Adjustment; Major Sector: Public Sector Management; ProjectID: P008780


Performance Audit Report on Romania: Technical Assistance and Critical Imports Loan (Loan 3363-RO) and
Structural Adjustment Loan (Loan 3481-RO)

            Attached is the Performance Audit Report (PAR) for the Technical Assistance and Critical
Imports Loan (TACI) (Loan 3363-RO for US$180 million, approved in FY91 and to close in FY97) and the Structural
Adjustment Loan (SAL), (Loan 3481-RO for US$400 million, approved in FY92 and closed in FY95) prepared by the
Operations Evaluation Department. These two loans marked the renewal of the relationship between the Bank and
Romania in the post cold war era. Comments by the Government are incorporated in the text as well as included as
Annex 3.8 to the report.

         The TACI loan was to provide emergency assistance to Romania to prevent further collapse in its production
system and to support the reform process. The critical imports component financed spare parts and equipment for
seven potentially competitive sectors: petroleum and gas, power, lignite mining, transportation, telecommunications,
irrigation and agricultural machinery. The technical assistance component financed studies, equipment purchases and
technical advice. Project implementation, particularly imports, experienced serious delays. Contributing factors
included the borrower's unfamiliarity with international competitive bidding and desire to substitute grant funds for
some technical assistance loan monies. Delays reduced the value and usefulness of imports.

         The SAL supported the Government’s efforts to (i) pursue macro stabilization while liberalizing the trade and
price regime and eliminating consumer subsidies; (ii) reform the public enterprise sector by restoring financial
discipline and through privatization; and (iii) ensure an affordable and effective social safety net. The SAL established
and successfully achieved well-targeted goals in all these areas.

        The outcome of the TACI project is rated as marginally satisfactory, sustainability as unlikely and institutional
development as negligible. The outcome of the SAL is rated as satisfactory, sustainability as likely and institutional
development as modest. Bank performance is rated as marginally satisfactory for the TACI and satisfactory for the
SAL. These ratings agree with those in the Implementation Completion Report (ICR) of the SAL. The ICR for the TACI
loan has not yet been prepared as the loan will close in December 1996.

        A few important lessons can be learned from these operations. First, the design of the lending instrument
must conform to loan objectives. For example, a quick disbursing balance of payments support component is more
suited to dealing with a shortage of critical imports than the TACI method of procuring an agreed list of imports.
Second, project implementation is critical to project success and therefore should be accorded the same priority as the
loan approval. The TACI experienced difficulties in achieving its objectives for lack of sufficient attention to
implementation issues. Third, holding the line on basic principles while being flexible in specific approaches to follow
contributes to a successful project outcome. The Bank’s persistence in upholding basic principles while dealing with
three successive governments in Romania contributed to the SAL’s success. Fourth, swiftness in loan preparation to
take advantage of a supportive political environment leads to rapid advancement of the reform agenda. Delayed
preparation of the SAL compromised its effectiveness due to changes in political regimes. The borrower has argued
that the first three lessons should serve as the basis for Bank-Romania dialogue on projects currently under
preparation.