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Romania’s Govt To Limit Budget Revisions – Draft Law

Romania’s government will no longer be able to make more than two budget revisions during a year, and the budget won’t be revised in the first half of the year, according to the fiscal responsibility draft law.
Romania's Govt To Limit Budget Revisions - Draft Law
30 dec. 2009, 14:34, English

Total budget expenses may be increased in a budget revision only to pay the public debt and the national contribution to the EU budget, according to the draft, adopted Tuesday by the government and obtained by MEDIAFAX.

The annual increase of total budget expenditure will have to be lower than or equal to the estimated nominal growth of the gross domestic product.

If taxation levels are raised, the expenditure increase will have to be equal at most to the revenue increase, and the expenses may be hiked in the year after the taxes were raised.

During a fiscal year, funds earmarked for investments cannot be used to cover current costs, the draft states.

The document shows that the past years’ economic and budgetary policies have led to large macroeconomic imbalances that need to be corrected in the coming period.

Excessive public spending, which doubled between 2005 and 2008, has deepened the fiscal imbalance, and a large part of the expenditure comes from public staff and pension costs.

In both 2007 and 2008, the budget was revised five times throughout the year and almost each revision permitted the increase and the reallocation of expenditure, while an overestimation of the public revenue encouraged a raise in spending.

The fiscal responsibility law is one of the key reforms Romania has to adopt under the terms of the EUR20 billion financial package agreed with the International Monetary Fund and the European Commission.

The law will, among other things, set up procedures for improved multiyear budgeting; establish limits on budget revisions during the course of the year; lay out fiscal rules on expenditures, public debt and the primary deficit; create a fiscal council to provide independent and expert scrutiny; and set up a framework for the issuance and management of guarantees and other contingent liabilities.