Romanian Govt. operates budget revision, keeps deficit target at 2.76%

Romania’s finance minister Eugen Teodorovici on August 6 unveiled the draft of the first budget revision this year.

The revision comes along a package of measures aimed at boosting budget revenues: a tax on soft drinks based on their sugar content, higher excise duties for tobacco and the elimination of the waiver for health and social security contributions for gift vouchers. On the expenditure side, the Government will reduce the personnel in the central administration (the number of state secretaries) and will freeze filling vacancies in the budgetary sector except for the employment of the graduates from the Police Academy and Magistrates Academy, or in the health and education systems where needed.

As regards the budget revision itself, the revenues were revised upward by RON 3.75 billion (EUR 790 mln, or 0.37% of GDP) while the expenditures increased by RON 3.95 bln (EUR 830 mln, or 0.39% of GDP), Hotnews.ro reported. The deficit to GDP ratio will remain the one set under the initial budget planning passed in the spring, 2.76% of GDP (since the nominal GDP was revised upward as well).

Despite the bill indicating negative corrections for the budgets of several ministries (Education, Business Environment), finance minister Eugen Teodorovici claims the revision is “positive” because “there is enough money left for paying wages by the end of the year,” adding that the funds needed were initially evaluated in excess.

The spokesperson of junior ruling coalition partner ALDE, Varujan Vosganian, said that the negotiations on the budget revision are not over. ALDE insists on enough money being earmarked for investments, he stated.

The changes operated under the revision are quite significant: either based on uncertain revenues (better VAT collection), or likely to generate social tensions (insufficient money for school teachers).

More revenues are expected due to higher profit tax collected from companies and particularly banks (+RON 1.6 bln), higher tobacco excise duties and new excise on sugary beverages (+RON 482 mln), front payment of the recipients of fiscal amnesty (+RON 1.89 bln), better VAT collection (+RON 3.6 bln), and the tax on bank assets (+RON 300 mln).

Separately, the budgets of several ministries and institutions were cut, the Government typically invoking subdued use of budget funds in the first half. Consequently, the budgets of the Education Ministry (-RON 1 bln), European Funds Ministry (-RON 682 mln), Research Ministry (-RON 369 mln), Agriculture Ministry (-RON 310 mln), Business Environment Ministry (-RON 243 mln), Economy Ministry (-RON 226 mln) among others had their budgets cut.