VAT Hike Accepted By IMF, Will Add RON3.5-4B To Budget – Romanian Fin Min

Vladescu said the GDP and inflation forecast for this year will have to be updated.

"The idea that there are alternatives, such as cutting material and capital expenses, is absurd," he added.

The Government has decided to increase VAT from 19% to 24%, leaving the flat tax as it is, and will also ask the Parliament to hurry the application of the bills reducing public sector salaries and recalculating special pensions, people close to the matter told MEDIAFAX on Saturday.

The proposal to hike VAT will be sent to the International Monetary Fund, whose board will probably hold a meeting Wednesday on whether to disburse the next installment of the EUR20 billion loan.

This information was confirmed by Prime Minister Emil Boc at the end of the Cabinet meeting. He also said the VAT hike would be applied as of July 1.

"We had no better solution, given the Constitutional Court's ruling. We will correlate our fiscal-monetary policies with those of the National Bank to keep inflation and the euro-leu exchange rate under control," said Boc.

The prime minister also stated the VAT hike is the Government's only decision and there are no plans to increase social healthcare system contributions or pension taxation.

The Government will also insist that the Parliament amend the bills reducing public sector salaries and recalculating special pensions before the summer recess, so that the measures can be applied as of July 1.

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