The 2014 Budget

The scarcity of official information regarding Romanias draft budget for 2014 has sparked new discussions and tensions among politicians on all sides of the isle in Bucharest.

România Internațional, 04.11.2013, 13:36

The draft state and social security budget for 2014 is set to be submitted to the executive on Wednesday. The document has been discussed with the joint IMF and European Commission delegation to Bucharest, which had arrived to discuss a new precautionary agreement. So far, little official data is available on the budget. The executive expects an economic growth of 2.2%, an inflation rate of 3%, and a reference exchange rate against the Euro of 4.45 lei. The document also provides for adjusting pensions for inflation and raising small salaries. Also, the government expects public expenditure 1.3% higher, and reducing unemployment by 20,000.

One of the main issues that the Executive faces is boosting its revenues, especially given that in the first three quarters of 2013 they were lower than anticipated, mainly due to snags and delays in collecting taxes. In order to cover its deficit, the executive is considering widening its tax collection base. Very little official information has been provided about new forms of taxation being introduced. The executive is also considering eliminating certain loopholes considered unjustified, still present in the present tax code. For the time being, what is certain is that they will be maintaining the 16% flat tax rate. Prime Minister Ponta insisted on this as the media was circulating rumors of changes being operated in that respect, which created tensions within the ruling coalition.

“We have a very clear political arrangement made when the Social Liberal Union was formed, to maintain the flat tax rate at 16%.”

At the same time, Social Liberal Union co-leader Crin Antonescu believes that Romania’s new agreement with the IMF is a handicap, saying that it prevents the country from having a real economic and budgetary policy. The Liberal Democrats in the opposition are accusing the government of lack of transparency in their negotiations with the IMF regarding the 2014 budget. Liberal Democratic first vice-president, Andreea Paul, said that Romania’s greatest handicap is not the IMF, but the Social Liberal Union:

“The Liberal Democrats believe that the Social Liberal Union must cease being habitually secretive. Romanians have a right to know what’s coming. When you negotiate with the IMF from the position that the Ponta government now has, we can only expect one solution: new tithes on Romanian incomes. The Ponta government failed to grow the economy two years in a row. Romania needs a development budget, not a primitive socialist budget.”

After the experts from the IMF and EC conclude their visit on Tuesday there will hopefully be more details on the 2014 budget.