Romanian Government reaches deal with “troika” on budget deficit for next year

The Romanian Government has reached an agreement with the International Monetary Fund (IMF), the European Commission (EC) and the World Bank on next year’s budget, after one week of harsh negotiations. The Government managed to convince the troika of international lenders to accept a cash budget deficit of 1.83% of GDP, double compared to the deficit they initially asked, and even above the 1.4% initial deficit target for next year, Prime Minister Victor Ponta announced on Tuesday, December 9. Ponta then explained that the budget deficit according to ESA (European System of Accounts), will be 1.2% and the structural deficit will be 1%. The budget will have total expenses of RON 238 billion (some EUR 53.6 billion, at an exchange rate of RON 4.44 per EUR), revenues of RON 225 billion (EUR 50.7 billion), and a deficit of RON 13 billion (EUR 2.9 billion), according to Ponta. He added that the budgeting process for next year takes into consideration a GDP growth of 2.5%, which is similar to that in 2014. This is very important, as a higher GDP also leaves room for a higher deficit, in nominal terms. Prime Minister Ponta also said that the budget for next year will not include any tax increases, but that it covers all the social measures which were approved this year, such as the social security tax (CAS) cut by 5 percentage points, which means lower revenues for the social security budget, and the 5% increase in pensions. The minimum wage will also be increased to RON 975 (almost EUR 220), starting January 1, from RON 900 (EUR 203). The state will also spend some RON 28 billion (EUR 6.3 billion) for co-financing EU financed projects. “These are the main indicators of the budget for 2015. I hope the budget will be finalised by Friday morning, when it should be sent to the Parliament,” Ponta said. He added that the budget should be discussed in the Parliament’s special commissions next week. The delegation of the European Commission, IMF and World Bank will return to Romania at the end of January 2015 to make the review on the agreement. The current agreement ends in 2015 and Prime Minister Ponta said Romania doesn’t need a new one. editor@romania-insider.com