Budget adjustment at the end of the year

The recent budget adjustment announced by the government is fueling political disputes.

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Bogdan Matei, 29.11.2019, 13:55

The year’s 2nd budget rectification approved on Thursday by the Liberal government in Bucharest has pushed the budget deficit up to 4.4% of the GDP as against 4.3% as was initially stipulated when the document was submitted for public debate. The finance minister Florin Cîţu has explained that, in the last two days, they have identified certain expenses that had not been stipulated in the budget by the former Social Democratic cabinet.

He has announced that an additional amount of around 400 million Euros has been allotted for the payment of social security rights by the end of the year. The finance minister has added that more money was also allocated for the payment of increased salaries in the public healthcare institutions and for medicines. The regional development ministry has also received more money for the National Rural Development Program. Additional funds will equally be channeled towards the Start-Up Nation program. The budgets of the Romanian Intelligence Service, the Foreign Intelligence Service and the Protection and Guard Service will also go up, the adjustment of their budget having been approved during Wednesday’s meeting of the country’s Supreme Defense Council. According to the budget adjustment bill, money will be cut from the ministries of education, interior and transport.

According to minister Cîţu, with this budget rectification they are putting an end to a practice according to which the money which had to be used for social expenses was channeled towards the Social Democratic local authorities, and also according to which, at the end of the year, the deficit was artificially reduced by postponing certain payments for the next year. The finance minister, a fierce adversary of the former Social Democratic government headed by Viorica Dancila, says the rectification observes the law and through this rectification they will show what has been stolen, from where and what has been overestimated.

In reply, Cristian Socol, one of the members of the former Social Democratic government involved in the drafting of the governing program, says that the budget deficit could be maintained at around 3% of the GDP. He claims that the new government is wasting the public money to later put the blame on the disastrous situation left behind by the Social Democrats. In his opinion, some of the expenses included in the budget rectification bill could have been phased out, such as the more than 6 billion lei for the National Rural Development Program, the VAT refund, the damages to be paid by the National Authority for Property Restitution or what he calls discretionary expenses.

Cristian Socol also believes that revenues could have been increased if the National Agency for Fiscal Administration had boosted tax collection efforts by the end of the year. Beyond political disputes, the national bank’s chief economist Valentin Lazea warns of the risks caused by the pension increase, according to the legislation in force. He claims that the negative impact, which can already be felt, will result in a rise in the budget deficit, and considers that postponing the enforcement of the new pension law, a law passed by the former Social Democratic majority, would be a good option. (translation by L. Simion)