IMF to review stand-by deal with Romania in June-July

By bne IntelliNews May 20, 2014

An IMF expert team will visit Romania first in June and afterwards in July to review the two-year stand-by arrangement signed last autumn, budget minister Liviu Voinea was quoted as saying by news agency Agerpres.

The planned budget adjustment will be operated at the Fund’s second visit, Voinea said. In the meantime, budget revenues should strengthen in line with the economic activity, he added.

A key issue to be discussed with the Fund in regards to the budget is the planned cut in the social security contributions. Given the schedule, it is impossible to enforce such a move as of July - while a final decision will probably be postponed until the revenues support it.

Romania’s government cannot afford cutting the social security contribution rate as it intends to do, as long as it collects less money than planned, the head of the independent fiscal council, Ionut Dumitru, has warned. The government has to improve the collection rate first, he stressed. The impact of a 5pps cut of the social security contribution rate would be RON 2.5bn in H2 – or RON 5bn [EUR 1.1bn, 0.8% of annual GDP] per year, the fiscal council estimates.

Romania and the IMF agreed to cut this year the budget deficit to 2.2% of GDP under both the ESA and cash methodology. Last year’s cash deficit was 2.5% of GDP and was around 2.2% of GDP under ESA as the government struggled to cut the payment arrears.

First-quarter revenues were however disappointing despite the stronger than expected GDP performance. In the quarter, the tax revenues fell RON 1bn [EUR 220mn, 0.16% of annual GDP] below target. But the enforcement of the higher car fuel excise tax as of April and of the special fixed assets tax payable starting May are expected to boost the government’s revenues.

Related Articles

Non-performing loans hit historic low in CESEE, but early warning signs emerge, says EBRD

Non-performing loans (NPLs) in central, eastern and south-eastern Europe (CESEE) fell to their lowest levels since the global financial crisis in 2024, but early indicators suggest rising risks ... more

EC clears €200mn capital increase at Romanian state-owned CEC Bank

The European Commission has approved Romania’s planned €200mn capital increase for state-owned CEC Bank, allowing the country to proceed with strengthening the lender’s financial position, ... more

Austrian bank Addiko to enter Romanian market with consumer loans first

Addiko Bank, an Austrian financial institution specialising in the consumer and SME sector operating in Central and South-Eastern Europe (CSE), is preparing to launch operations in Romania with the ... more

Dismiss