Romania to ask IMF to accept a higher deficit for infrastructure expenses, prime-minister says

Publish date: 06-07-2009
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Premier Emil Boc said he will ask the finance minister to discuss with the representatives of the International Monetary Fund and the European Commission about a higher flexibility with the expenses for infrastructure, as the budget deficit generated by these will not worsen the economic situation.

The prime-minister deems the money spent on infrastructure will come back ten-fold higher in the economy, including by creating new jobs. He added "it is a crime" that the money allotted for infrastructure to not be used during the summer, the best period in the year for constructions.

The president of the Social-Democrat ruling party PSD, Mircea Geoana, declared in an interview for Reuters that the budget deficit could exceed this year the level settled with IMF, especially if the economic situation gets worse, but added no decision will be completed before consulting the Fund's officials.

The IMF representative for Romania and Bulgaria, Tonny Lybek, did not mention wether the Fund will accept to raise the budget deficit target established with the local authorities and added all discussions on this matter before IMF's evaluation in August are pure speculations.

The Fund accepted in May to increase the budget deficit target for Hungary from 2.9 to 3.9 percent of the gross domestic product (GDP) as the economy is estimated to shrink by 6.7 percent this year.

Lybek underlined Romania's target is already very high, of 4.6 percent of the GDP, and that it already reached this level.

The government settled with IMF to fit in some budget deficit targets each quarter following the 20 billion euro agreement, and not exceed 24.36 billion lei at the end of December (4.58 percent of the GDP, estimated at 531.3 billion lei for 2009).

For the end of the second quarter the target was established at 14.51 billion lei (2.73 percent of the GDP) and for the third quarter at 18.61 billion lei (3.5 percent of the GDP).

The Finance Minister Gheorghe Pogea declared on July 1 that the budget deficit for the first six months reached 2.7 percent of the GDP, slightly below IMF target, according to initial evaluations.

An IMF mission will come to Bucharest in about o month for the quarterly evaluation, to establish if it blocks the second installment of the loan.

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