Romanian government drafts main policies under new stand-by deal with IMF

By bne IntelliNews November 5, 2013

Romania’s PM Victor Ponta and finance ministry Daniel Chitoiu have announced the main provisions of the new stand-by agreement with the IMF after the Fund’s team completed on November 5 its first quarterly review of the agreement that was sealed in September.

The head of the IMF team visiting Romania will hold a press conference later in the day on November 5.

The measures announced by Romanian officials, as quoted by Hotnews, reveal concerns with the dynamics of fiscal consolidation and insufficient budget revenues:

  1. A new excise of EUR 0.07 per litre will be levied on car fuel. The impact would be no more than 7-8% of the car fuel price, minister Chitoiu estimated. The revenues will be used for road infrastructure projects, the government assured.
  2. All excise taxes will be in the future indexed to inflation rather than expressed in euro [and converted at end-Oct exchange rate]. The move is visibly aimed at avoiding the impact of the local currency’s nominal strengthening this year that would have otherwise had a negative impact on excise revenues in 2014.
  3. New taxes will be levied on special constructions of legal entities - like the infrastructure of electricity network operators.
  4. Royalties for mineral resources will rise by 25% - except for oil and gas, where separate negotiations are underway with the main companies.
  5. Social contributions might be cut by 5pps in mid-2014 – but only if budget revenues in the first half of 2014 demonstrate that such a move does not affect the budget deficit.
  6. Pensions are indexed by only 3.76%. Under the circumstances of subdued inflation this might be seen as sufficient, but low-income families of retired persons will face the tough impact of natural gas [and utilities] price hikes different than the average.
  7. Public wages will increase by a different percentage for each category – with higher wage hikes for low wages.  Wages of highly qualified young personnel in education and healthcare will particularly increase, the government has promised without detailing however the specific wage hike rates.

The minimum wage will increase from RON 800 (EUR 180) currently to RON 850 as of January and to RON 900 later in 2014.

On the other side, the government decided to further loose the fiscal consolidation by allowing a 2.2%-of-GDP deficit next year, compared to 2% considered earlier in June and 1.8% envisaged at an earlier moment. The cash and ESA deficit would be the same next year, Chitoiu said. The 0.2%-of-GDP supplementary deficit would be aimed at investments, the government officials explained. Public investments would reach 6% of GDP, according to the government projections.

Regarding state-owned enterprises:

  1. State-owned cargo railway company CFR Marfa will undergo reorganisation and will be privatised in mid-2015.
  2. The IPO at Hidroeelctrica hydropower company will take place in May-June next year. An independent manager would be appointed by the end of November.
  3. State-owned electricity distribution firm Electrica will be privatised via capital increase. The government will give up the majority 51% stake.
  4. The shares of coal-fired power plant CE Oltenia will be floated in Q4 next year. A 15% IPO is considered.
  5. Oltchim chemical plant is no longer tackled under the SBA with the IMF. As we reported, the company has undergone a failed privatisation attempt and filed for insolvency earlier this year. Currently, the state struggles to sell its core assets and hopes the future buyer will continue the operations.

Related Articles

RBI doubles net profit y/y in Q1 as Russian business recovers

Raiffeisen Bank International (RBI), the second largest bank operating across Central and Eastern Europe by assets, reported that net profit almost doubled year-on-year to €220mn in the first ... more

Shares of Digi Communications drop as CEO of Romanian subsidiary is investigated for corruption

Shares in Digi Communications closed the day 4.1% down at RON39.5 (€0.86) per share on the Bucharest Stock Exchange on May 17, the day after they were floated. The company was hit by a ... more

Businesses in Romania to benefit from better access to finance due to new EIB agreements

The European Investment Bank (EIB) and three Romanian banks (Raiffeisen Bank, Banca Comerciala Romana (BCR) and ProCredit Bank) signed agreements which should generate financing of €246mn to ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss