EXCLUSIVE: Romanian Govt Pledges To Keep Pensions Frozen, Sack 90,000 More Public Employees

The commitments are included in the additional letter of intent to the loan agreement with the International Monetary Fund, approved by the Government on Wednesday.

The letter says that, despite harsh economic conditions, Romania met the budget deficit target set for the first half of 2010, mainly due to its tight grip on public spending and the reduction in the number of public sector employees by almost 27,000.

It also says the Government’s efforts for fiscal adjustment until the end of 2010 will be backed by the recently adopted adjustment package (accounting for 4.6% of the GDP, on annual basis). The package includes the increase in the value added tax by five percentage points, to 24%, the 25% cut in public sector wages and the 15% cut in most social benefits, as well as continued layoffs, sacking 74,000 public sector employees by the end of the year.

Furthermore, the Government will keep pensions frozen in 2011 and scrap the 13th salary, vacation bonuses and heat subsidies.

Romania and the IMF last year signed a EUR13 billion loan agreement, part of a larger EUR20 billion aid package that includes funds from the EU and other international lenders.