Romanian Public Sector Wage Law To Be Amended By October 30 Under IMF Agreement

"Creation of non-monetary bonuses will be prohibited. Monetary bonuses will be consolidated—eliminating the large majority of bonuses or rolling them into the base wage", the letter of intent says. It is signed by Finance Minister Gheorghe Pogea and National Bank of Romania governor Mugur Isarescu, and addressed to International Monetary Fund general manager Dominique Strauss-Kahn.

Romanian authorities plan to establish a unified, simplified pay scale, and reform the current system of bonuses for the public sector.

"The law could provide for a phasing-in period of the reforms of up to 3 years, and efforts will be made to safeguard the real incomes of the lowest paid workers during this process", the letter says.

The IMF forecasts budget expenses on staff could be cut from 8.6% of the GDP at the end of last year to 7.8% in 2009, 7.2% in 2010 and 6.7% in 2011.

Through the letter of intent, the Government pledged to cancel increasing public salaries by 5% in 2009, or to compensate certain increases with layoffs, and cut the number of employees by replacing only one of seven vacancies.

Romania agreed end-March with the IMF, the European Commission and other financial institutions a EUR19.95 billion economic program supported by a EUR12.95 billion loan under a two-year Stand-By Arrangement from the IMF.

The program was approved by the Executive Council of the IMF in May and the first installment of the loan, in the amount of EUR5 billion, was transferred to the National Bank of Romania’s account immediately. The first installment of the EUR5 billion loan granted by the European Commission will enter Romania by early July.