10/05/2010 - A joint Commission - IMF - World Bank mission has reached agreement with Romania on additional measures necessary to reduce Romania's 2010 budget deficit.
The joint mission to Bucarest from 26 April to 10 May has concluded its discussions with the Romanian authorities on the implementation of the policy programme under the € 20 billion multilateral assistance package. Agreement has been reached on additional measures to narrow the 2010 budget deficit to 7.3% of GDP (in ESA95 terms). Such a consolidation effort is necessary to put Romania's public finances on a sound footing, while creating the conditions for a sustainable economic recovery.
>> Press release of 10 May 2010. IP/20/553. Statement after a joint Commission - IMF - WB mission to Romania
The Romanian authorities and the mission concurred that fiscal performance in the first quarter of 2010 had been weak, both on the revenue and the expenditure side.
Without additional measures the 2010 deficit target (5.9% of GDP in cash terms or 6.4% of GDP in ESA95 terms) would be missed by a significant margin. In view of this, the Romanian authorities have decided to take a number of additional measures aimed at narrowing the 2010 budget deficit to 7.3% of GDP in ESA95 terms.
If these measures mainly on expenditure do not prove sufficient to reach the agreed deficit target, the Romanian authorities have committed to implement the revenue raising measures required to achieve the 7.3% of GDP budget deficit target.
The mission concluded that Romania had largely met the other policy conditions associated with the EU loan. Further progress has also been made in the area of financial regulation and supervision. Recently legislation was passed in order to improve the bank resolution framework and ensure the independence of non-banking financial sector regulators. Moreover, a contract has been signed with the World Bank to conduct a functional review of the public administration. This is essential to make more rapid progress in terms of the absorption of EU structural funds.
Subject to a favourable decision by the Commission and following consultation of the EU Member States, a Supplemental Memorandum of Understanding including the new measures agreed will be signed in June 2010.