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The government
in Bucharest on Monday adopted the third budget adjustment this year.
According to PM Ludovic Orban, the adjustment was necessary to cope with
the expenses triggered by the COVID-19 pandemic. The rectification was also
needed to secure the payment of pensions and for the balancing of local
budgets. PM Orban also explained new challenges and expenses never ceased to
occur, given that the pandemic but also a series of legislative initiatives increased
the pressure on social expenses. Contrary to the estimates made in the
summer, by the end of the year the budget deficit will account for 9.1% of
the GDP, while the economy will shrink by 4.2%.
It is the last adjustment the Government has adopted this year, which took the budget deficit to more
than 96 billion lei (that is more than 19 billion Euros). The extra sums of
money will be earmarked to the Labor Ministry, for the payment of pensions,
for the benefits of furloughed staff and the flexible work
schedule. The Healthcare Ministry will also receive an increased sum of
money, in support of the Ministry’s fight against the COVID-19 virus. Of the approx. one billion lei, that is roughly 200 million Euros, extra sums
of money will be earmarked for the payment of incentives for ambulance
workers who were left out of the initial version of the Government’s
executive order stipulating that risk condition incentives would be earmarked
for doctors on the front line of the fight against the pandemic. Furthermore,
Finance Minister Florin Cîţu made public the fact that Romania’s contribution
was increased for the European financial effort to come up with a vaccine
against SARS-CoV-2.
Extra sums of money would also be earmarked
for investments. Florin Cîţu specified the most recent budget adjustment provided for the continuation of investments, standing at around 55 billion
lei (roughly 11 billion Euros), up from the initial budget. Also, Education
and Agriculture have also received extra sums of money as a result of the
latest redistribution of funds in 2020. The Ministry of Agriculture will be
the recipient of extra sums of money, to be paid in compensations to the
drought-hit farmers. In turn, the Finance and the Interior Ministry will
receive less money as a result of the third budget adjustment. However,
the Defense Ministry will be subject to the most substantial cuts, accounting
for around 2 billion lei (some 400 million Euros). The
Presidential Administration and the Chamber of Deputies will also receive
less money than initially stipulated.
In another move, the Fiscal Council has
estimated the budget deficit in 2020 would account for 9.8% of the GDP,
standing at 0.7% above the Finance Ministry’s forecast. According to the
Fiscal Council’s stance on the Government’s third budget adjustment in
2020, the public finance status at the end of the year was important because
it was the departure point for the budget construction in 2021. The Fiscal
Council, among other things, also recommended a restructuring of the
expenditure as well as of the budget revenues through the enlargement of the
taxation base, the improvement of the tax collection system and a better
absorption of the European funds.
(Translation by Eugen Nasta)
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