IMF demands higher budget revenues

Romania needs clear and consistent economic policies, a more ambitious programme of structural and institutional reforms, more money for the budget – possibly by increasing the VAT or the 16% flat tax, better management of public expenditures, moderate wage increases, and, last but not least, a declining inflation, explains the most recent report of the International Monetary Fund (IMF). The preliminary conclusions by a group of experts, who were present in Bucharest at the beginning of this month see as “imperative” an increase in budget revenues, as well as a strengthening of the public” s confidence in the NBR”s commitment to meet the inflation target. The IMF maintains that the drastic cutting of public expenditures, which was alluded to in the 2006 budget, is not sustainable and will lead to an accumulation of new arrears. Instead, the report suggests that what is needed is the expansion of the tax base and an increase in administrative and property taxes. Immediately after the IMF delegation left, the central bank increased the monetary policy rate by one percentage point and took other restricting steps in the absence of which, experts of the Fund said that “the inflation rate would probably exceed the target by a lot at the end of 2006.” ZF