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| THE ROMANIA-IMF RELATION 09/09/2010 |
| (2010-09-09) |
| Last updated: 2010-09-10 15:52 EET |
The government in Bucharest has approved the additional letter of intent to the IMF agreement. The document reveals that the commitment regarding the relation with the IMF remains part of the budget restrictions list.
The executive will lay off 74,000 more state employees by the end of the year, after already sacking 27,000 employees. In 2011, 15,000 other jobs in the state sector will be slashed, while pensions will remain frozen. The 13th salary, holiday bonuses and heating subsidies will be eliminated. Romania committed with the IMF to revising the social assistance system, the Labor Code and other laws regarding the labor market, in order to improve the salary negotiation framework.
On the other hand, fees of national transport and utilities companies will increase. The Romanian government promised the IMF it would levy taxes on high incomes and extend criteria to defend the taxable income, so that all non-exempt profits be taxed. The dramatic cut in budget expenses, with salaries and social allowances reduced by 25%, aims at slashing the budget deficit to 6.8% of the GDP. If this target is not attained, the government will be forced to raise taxes and duties, which could put economic recovery on hold. Until now, Romania has received 10.7 billion euros from the IMF, of the close to 13 billion provided by the stand-by agreement.
At the end of this month, the Fund will assess the way in which Bucharest applies the agreed measures, and if the analysis is favorable, Romania will receive a new payment of the loan, worth more than 900 million euros. Bucharest continues to depend on money from the IMF and the EU to finance its budget deficit and next year, it will receive 5.7 billion euros, for the same purpose. President Traian Basescu believes that at least 1.5 billion euros of the respective sum should be poured into investment projects.
In his view, the main objective, which he discussed on state television, is purchasing land needed for highway construction. Basescu continues to back the reduction of certain welfare formulas. He mentions the situation in rural areas, where introducing the minimum guaranteed income served as a deterrent for peasants to want to work. The president believes that the pension fund deficit is causing a disaster, as it blocks the capacity to keep economy in motion.
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