The ratings on Romania reflect the country's significant progress in reforming its state-owned enterprise sector, together with EU membership prospects. Romania's recent progress in structural reforms should lead to lasting improvements in public sector finances. Moreover, prospects for deepening parastatal reform are encouraging. Improved macroeconomic stability and microeconomic reform have increased the probability that Romania will become a member of the EU by the official target date of 2007. The ratings remain constrained, however, by institutional weaknesses, external imbalances, and low levels of economic prosperity, although there would be a gradual catch-up with investment grade sovereigns if the government follows through on the current reform agenda. General government finances have improved markedly in 2004 on the back of buoyant domestic
