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IMF Advises Romania To Further Cut Budget Spending

The International Monetary Fund, or IMF, advised the Romanian authorities to harshen fiscal policy by significantly cuts in public spending, as revenues for 2009 are unpredictable and grounded on a too optimistic economic growth forecast, governmental sources told MEDIAFAX.
IMF Advises Romania To Further Cut Budget Spending
04 feb. 2009, 18:56, English

IMF strongly supports the government’s declared objective of reducing the fiscal deficit to around 2% of GDP. "However, the 2009 budget is based on optimistic assumptions for economic growth and tax collections, suggesting that further efforts will be required to reach that target," an IMF press release said Wednesday.
 
The institution predicts Romania’s economy might shrink in 2009.
 
IMF officials said that a further spending restriction is compulsory, as the revenues cannot be increased any more, after the Government already hiked excises and social contributions. In fact, IMF officials said that no tax hike measures can increase budget revenues.
 
Governmental sources said that salary spending were at 8.2% of the GDP.
 
“In the last six weeks of last year, 3% of the GDP were spent exclusively on salaries. In the 2005-2008 period, salary spending tripled. Maybe this will be one of the adjusted segments,” sources told MEDIAFAX.
 
Finance minister Gheorghe Pogea said last week that personnel spending will be cut from 8.4% of the GDP in 2008 to 7.5% of the GDP in 2009.
 
Romania’s budget deficit surpassed last year the maximum threshold of 3% of the GDP set by the Maastricht treaty, as it is estimated at 5.2% of the GDP.
 
The European Commission sees Romania’s budget deficit at 7.5% of the GDP in 2009.