Romanian Govt Might Cut Budget Spending For Local Auth, State Companies By EUR1B - Sources

The Romanian Government is in talks with the International Monetary Fund (IMF) to reduce the planned budget spending by EUR1 billion, mainly through closer surveillance and a limit on the sums used by the local administration and the large state companies, official sources said.

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“Cutting spending won’t exceed 0.9% of the GDP, or EUR1 billion. But this translates into severe budget cuts for next year, as fiscal consolidation is planned for the next two years. Romania’s deficit has to be below 3% of the GDP by 2011, which is firstly a requirement of the European Commission,” people close to the talks told MEDIAFAX.

According to the quoted sources, the Executive might set spending thresholds for local authorities, particularly by establishing the staff based on objective criteria, such as the number of inhabitants and the concluded investment projects.

“A big problem remains that of the state companies, who further report significant losses and swallow budget resources. The government should speed up the structural reforms not only on local level, but also within the central administration and the state-owned companies which cause significant loss,” the sources added.

The IMF accepted a hike of the budget deficit to 7-7.2% from 4.6%, on the backdrop of an economic contraction revision for this year from -4% to minus 8-8.5%.

The gross domestic product will reach some 500 billion lei (EUR1=RON4.2186) compared to the initial estimation at RON531 billion.

The International Monetary Fund maintains the calendar for the adoption by Romania of a single and unitary law regulating salaries across the public sector, but is open to talks with government on the matter, Jeffrey Franks, head of the IMF mission to Romania, said on Wednesday, August 5.

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