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IMF Mission begins third evaluation of precautionary agreement with Romania

The International Monetary Fund (IMF) Mission on Tuesday has begun the third evaluation of the stand-by precautionary agreement with Romania. One of the main discussion topics will be the revision of the economic growth prognosis for 2012, under the 3.5 percent level initially taken into account, and the way in which this thing will affect the draft budget for 2012.

On the other hand, the performances in terms of inflation exceeded any expectations. The IMF experts, though, want to analyse whether the inflation decline is a temporary one, in the context of a very good agricultural production, or a durable one. In case the inflation trend is a temporary one, the IMF will recommend further caution concerning the monetary policy.

The achievements of the Romanian authorities regarding the budget for 2011 are better than forecasted and there will not be any problems in maintaining the deficit target, but for 2012 the budget deficit will have to be calculated based on the cash methodology, allowing keeping within the under 3 percent of the GDP deficit target, calculated according to the EU's ESA method.

Other topics on the discussion agenda refer to the reforms in the field of health and the sate-owned enterprises governance, especially those in the energy and transports sectors.

Another issue to be discussed is the sale of some minority stock packages in the state-owned companies. The IMF admits that the market conditions have deteriorated for this process, but maintains that this type of privatisation must continue and the Government must take into account the sale of some majority share packages in order to draw interested investors.

Concerning the possible salary increases or tax reductions in 2012, the IMF will let the authorities decide on how the budget resources will be spent - on investments, on reducing the CAS or on salary and pension increases.

In the IMF opinion, the budgetary space for salary increases or tax reductions is very limited. The international financial institution says, though, that a higher European fund absorption for public investments could generate the necessary fiscal space.

The joint mission of representatives from the IMF, the World Bank and the European Union will be in Bucharest until November 7.

Budget deficit, up to 2.5 percent of GDP at September-end

The budget deficit went up to 2.5 percent of the gross domestic product (GDP) at the end of September this year, after which, at the end of August, the negative balance stood at 2.39 percent of the GDP.According to the Public Finance Ministry the execution of the general consolidated budget in the period January 1 - September 30, 2011, ended with a 13.7 billion lei deficit, namely 2.5 percent of the GDP, which allows keeping within the 4.4 percent of the GDP annual target.

The revenues of the general consolidated budget, amounting to 131.6 billion lei, were 9.3 percent higher compared with the same period of the previous year, and the expenditure, accounting for 145.25 billion lei, registered a 1.1 percent increase in nominal terms compared with the above-mentioned period.

The amounts reimbursed by the European Union increased 52.2 percent compared with the same period of last year.

The 1.1 percent increase in nominal terms of the expenditure from the general budget was mainly generated by the increase in expenses for projects with European financing. According to the Finance Ministry, in real terms, as a share of the GDP, the expenses diminished 1.2 percentage points compared with the first nine months of 2010.

The payments for projects financed from EU funds increased 61.5 percent compared with the first nine months of 2010 and the expenses with the interest rates advanced 26 percent compared with the previous year, representing 61.5 percent of the annual programme.

Next year Romania must register a budget deficit under 3 percent of the GDP in order to be able to exit the excessive deficit procedure launched by the European Union in 2008.

President Traian Basescu on Monday said that because of the high financing costs, the state budget for 2012 had to be approached with a deficit much under 3 percent in ESA terms .

Sursa: http://www.actmedia.eu

Tags: deficit european compared mission terms percent budget romania cas

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