IMF: “Difficult expenditure cuts would have also been required under any scenario”

The International Monetary Fund has suggested a revenues increase option to the Romanian authorities, which would have meant an increase in VAT and in the flat tax, but also a progressive taxation, while difficult cuts in spending have been taken into account in all scenarios, the IMF has recently said. “The authorities and the IMF are in full agreement that urgent corrective action is required to address the serious economic situation facing Romania. We have discussed various options as to the appropriate mix of measures that might be needed. The IMF had suggested an option that would have entailed greater reliance on revenue measures. Among the revenue measures discussed were increases in VAT and the flat tax, plus a move to a progressive income tax,” said Jeffrey Franks, IMF mission chief to Romania. “Given the size of the fiscal gap, some difficult expenditure cuts would have also been required under any scenario. The option that was chosen by the Government focused mainly on rolling back what it considers to be unsustainable expenditure increases in recent years. The IMF fully recognizes that the choice about which option to pursue belongs to the government, and agrees that the Government's choice will ensure that the 2010 budget deficit remains within appropriate bounds,” Franks added. Read more about Romania's planned reforms after the meeting with the IMF and in view of receiving the next installment loans in the stand-by agreement with the fund.