WASHINGTON (Reuters) - The IMF's board on Friday approved a two-year $2.7 billion (1.67 billion pounds) stand-by arrangement for Romania, providing the European Union's second-poorest economy with a much needed buffer against external shocks.

Under the deal, first announced in late July, Romania would not plan to draw on the funds, but simply leave them as a buffer to reassure investors. The country also plans to request another 2 billion euros ($2.7 billion) in precautionary aid from the EU.

Romania, which had two prior stand-by agreements with the IMF, has reduced its fiscal and external imbalances, but real GDP is still below levels prior to the financial crisis and the economy is vulnerable to shocks, Nemat Shafik, IMF deputy managing director, said in a statement.

"The new (program) will support policy continuity, provide a reserve buffer, and catalyze growth-enhancing reforms," Shafik said. "It will also put Romania on the path toward exiting from Fund support."

Under the new deal, Romania has committed to structural reforms, including updating its health system and moving ahead with the sale of state assets in the energy sector.

The IMF also called on Romania to implement banking reforms, including helping banks shed non-performing loans on their balance sheets and improving the governance of the non-bank financial supervisor.

(Reporting by Anna Yukhananov; Editing by Theodore d'Afflisio)