Economy 3 min read By Alice Ashford
Fiscal Council says cash deficit could reach 6.25% of GDP this year
The Romanian Fiscal Council says the revised budget gives the country the conditions to meet a cash deficit target of 6.25% of GDP this year, subject to risks, as the new government's first priority was a budget rectification.
Romania's cash budget deficit this year could reach the target of 6.25% of GDP, although the Fiscal Council warns that the outcome is subject to risks. The assessment is based on the revised budget structure and on developments recorded in the execution of the budget over the first nine months of the year, according to the council's analysis of the rectification presented by the Ministry of Finance.
The council said the budget, on the basis of the available execution data and the information presented with the rectification, has the premises needed to reach a cash deficit of 6.25% of GDP. The government's official target for the year is 6.2% of GDP, so the council's projection sits slightly above the official goal. The difference is small, but it is the kind of margin that the council has flagged as sensitive to how spending and revenues evolve in the final months of the year.
The rectification was the first urgent measure of the new government. It is designed to remove delays in the payment of some invoices that had accumulated in the public sector, an issue that has drawn attention in public debate. The Fiscal Council addressed the sums circulating in that debate as payment arrears. It said a deficit that appears reduced at nine months should be judged in light of possible delays in payments, and that discussions of sums in the tens of billions of lei left out of the official picture should be handled in a balanced way. The analysis draws a clear line between the headline deficit figure and the underlying pressures on public payments.
Finance Minister Alexandru Nazare presented the government's rectification as a measure aimed at keeping the deficit on track. The government adopted the rectification as an emergency step, and a second rectification is to follow, to be completed by the end of November. Nazare said the largest allocations went to the Ministry of Health and that all allocations were aligned with the objective of respecting the 6.2% of GDP deficit target for the year. Some ministries are set to receive additional funds under the revised distribution while others will lose money, a reallocation the government has presented as a way to direct resources where it considers them most needed.
The timing of the two rectifications matters for the outcome. The first is meant to address immediate pressures on payments, while the second, due by late November, is expected to finalise the budget adjustments before the year closes. Whether the cash deficit ends up near 6.25% or closer to the official 6.2% will depend on how far the measures reduce payment delays and how the remaining spending and revenue figures develop. The Fiscal Council has made clear that its projection is conditional on those risks not materialising in ways that push the deficit higher.
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