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:
- 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.
- 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.
- New taxes will be levied on special constructions of legal entities - like the infrastructure of electricity network operators.
- Royalties for mineral resources will rise by 25% - except for oil and gas, where separate negotiations are underway with the main companies.
- 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.
- 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.
- 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:
- State-owned cargo railway company CFR Marfa will undergo reorganisation and will be privatised in mid-2015.
- 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.
- State-owned electricity distribution firm Electrica will be privatised via capital increase. The government will give up the majority 51% stake.
- The shares of coal-fired power plant CE Oltenia will be floated in Q4 next year. A 15% IPO is considered.
- 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.
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