IMF: Lowering Romania’s Budget Gap To 3% Of GDP Is Challenging

05.09.2011 By Florentina Dragu

Romanian authorities face a “challenging” task in reducing the budget gap to 3% of the gross domestic product under ESA95 standards in 2012, particularly since budget calculations will include the losses of public companies, an official of the International Monetary Fund said Monday.

Speaking in a news conference in Bucharest, IMF mission chief Jeffrey Franks said the government must resist political pressure and take the necessary measures to reach the budget deficit target.

Romania will hold parliamentary elections in 2012 and there are already voices proposing a set of populist measures, including salary raises in the public system and lower social security contributions for employers.

The government must continue structural reforms, particularly in the arrears sector, Franks said.

"The arrears at the state companies represent a huge loss for the economic recovery," he added.

Franks said Romania has met the general arrears criteria for the first quarter of 2011, but there are still pressures in the healthcare sector.

The authorities should draft a series of strategies to substantially lower the arrears by the end of this year, he added.