The International Monetary Fund feels that Romania cannot afford a current account deficit exceeding 5.2% of the Gross Domestic Product in 2004, given this year’s estimated record of 6.5%.
The Romanian authorities have until the end of January 2004 to work out the measures able to lead to a $750m deficit cut. The authorities have so far identified three categories of measures: containing the consumer lending (a task that falls to the National Bank of Romania), cutting the quasi-fiscal deficit and pushing the budget deficit down. The last two measures are to be enforced by the Government.
The concrete measures identified so far would push down the deficit, but only to 5.5% of GDP. The Government is planning to talk the IMF into accepting this more relaxed target. An IMF delegation is expected in Bucharest by the end of January or the beginning of February.
The first of the above-mentioned measures also made the biggest impact upon the public – the National Bank of Romania endorsed the minimal lending norms aimed to contain the consumer lending growth.
“This measure will have the slightest influence, as it can trigger a $120m drop in the current account deficit, namely 0.2% of the GDP,” says Finance minister Mihai Tanasescu. According to the minister, the main set of measures will aim to cut the quasi-fiscal deficit, estimated at 2.5-3 percent of GDP. “This will be the core of economic reform in 2004,” Mihai Tanasescu stated.
Consequently, the Government has already announced price hikes for electrical power and natural gases, which are supposed to bring additional revenues to the utilities suppliers.
At the same time, Tanasescu says the price increases will come with “very strict” measures, to restructure the inefficient companies that will not manage to adjust to these changes. The natural gas price will go up 4% (5 dollars) every quarter. Electricity will be 9.2% more expensive for the population as of January 1, 2004, whereas companies will pay 10.2% more. The heating price will grow 12%, with the state budget set to cover the price increases for the population by subsidies to Termoelectrica.
Another set of measures includes layoffs – 6,000 people from the mining sector, another 6,000 from companies subordinated to the Privatisation Authority (APAPS) and several thousand workers from the railroad companies. razvan.voican@zf.ro