Government Raises Local Authority Loan Cap, Lowers Maximum Drawn Amount

05.25.2011 By Bostan Radu

Romania's Government will double the total ceiling up to which local mayors may contract refundable financing next year, but will also reduce the maximum amount they can actually draw in 2012.

The cap on refundable financing that may be contracted by local authorities will thus be increased to 1.4 billion lei (EUR339 million) next year, from RON700 million this year. On the other hand, the maximum amount that can be drawn will be reduced to RON900 million in 2012, from RON1.4 billion this year.

Refundable financing contracted to fund local public debt and projects supported by the European Union do not count towards the ceilings, but will be taken into account when drawing up the 2012 budget.

The Government announced last year that loans taken out by local authorities for investment projects will be given priority when the total amount authorized to be drawn reaches 80% of the annual ceiling, to avoid exceeding this cap and the target budget deficit.

The Executive has committed to reducing the budget deficit to 4.4% of the gross domestic product in 2011 and below 3% in 2012. Last year, the budget deficit was 6.5% of the GDP. (EUR1=RON4.1233)