Romanian gov't, IMF have in view massive spending cuts to achieve deficit target

The Romanian government and the International Monetary Fund (IMF) have in view massive cuts of public spending, to achieve this year's deficit target, announced on Thursday President Traian Basescu.

The president explained that, if the measures discussed with IMF is adopted, a financial resource would be created for major priorities, the first being the state debt payment to the companies, so that the latter could resume their activity.

He said that from the very start both the IMF team and the Romanian government have had in attention two variants: one of the "distrust" which supposed an increase of the VAT to 24 percent from 19 percent currently, the rising of the flat income tax to 20 percent from 16 percent now and a cut of the public sector salary fund by 20 percent, so that Romania should comply with the 6.7 percent to 6.8 percent of the GDP budget deficit, and a second of "trust" in the government capacity to massively cut expenditures in the public sector.

The head of state added that soaring taxes would have meant but blocking the chances of economic relaunch in the next three, four months. The decision to take the variant of trust in Romania's capacity to restructure has led to setting up some coordinates in which the letter to the IMF adopted by the Government will probably be signed on next Wednesday, said the president.

An IMF mission is in Bucharest for the fourth assessment of Romania's progress under a 20-billion-euro (25.54 billion U.S. dollars) IMF-led loan agreement signed last spring. Following the mission, the IMF will decide, in the second half of June, whether to disburse a fifth installment of 850 million euros to the eastern European country.

[Source: Xinhua, Bucharest, 06May10]

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