Romania, IMF Consider Harsher Spending Cuts To Reduce Deficit - Sources

Romania and the International Monetary Fund are considering drastic personnel and expenditure cuts to contain the budget gap at below 7% of the gross domestic product in 2010 without having to resort to tax increases, people familiar with the talks told MEDIAFAX Wednesday.

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"The budget deficit can be lowered to below 7% of GDP without any tax increases, provided the authorities take severe measures to reduce budgetary and personnel expenses in the public sector," participants in the talks between Romanian and IMF officials said.

Under a EUR13 billion loan agreement signed with the IMF last spring, Romania pledged to lower its budget deficit to 5.9% of GDP in 2010, from 7.4% of GDP in the year before.

However, following a worse-than-anticipated economic evolution in the first part of the year, the country might ask the IMF to allow it a higher deficit.

An IMF team is in Bucharest for the fourth review of Romania's agreement. Following the mission, the IMF will decide whether to disburse a fifth installment to the country, worth EUR850 million.

According to people close to the talks, the IMF could extend their stay in Romania by three days until May 10 to continue negotiations.

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