Romania will try to get the International Monetary Fund (IMF) to agree with an increase in the general consolidated budget deficit scheduled for next year to 3.7% of GDP, one percentage point above the 2003 level, 2.65%.
The reason behind this move is the need to finance infrastructure investments, and especially those in highways.
“Our proposition is to increase the budget deficit for a very specific reason – speeding up infrastructure investments. Without any possibility of an inflationary slippage, because the money will be spent exclusively on infrastructure. Everybody (IMF, EU) agrees we need funding for highways,” Finance minister Mihai Tanasescu said. He explained the surveys for highways were already in progress and the authorities in Bucharest had also started talks with banks that might finance the investments.
“We are aware we need to maintain macrostability. If we go for a higher budgetary deficit, then we will consider decreasing the quasi-fiscal deficit, ” Tanasescu says. The issue will be taken up with the IMF delegation due to arrive in Bucharest early next month for a new revision of the stand-by agreement, when the 2004 budgetary policy guidelines are to be set, as well.
The Finance Ministry over the last two years has been trying to compress the budgetary deficit as much as possible, by cutting public spending and this way attempting to set a downward inflationary trend. This is hard to sustain, though, for as long as the quasi-fiscal deficits are not controlled and stay at very high levels. Unless they go down a great deal, increasing the budgetary deficit is a risky business.