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Fiscal Council: Below-3pct deficit only possible with public spending cuts, leaner public sector
Without a falling trend in public spending and without a leaner public sector keeping the government deficit below 3pct will not be possible, Bogdan-Octavian Cozmanca, deputy chair of the Fiscal Council, warned on Thursday at a specialist seminar.
"Cutting spending in the implementation of the state budget has been used as an adjustment mechanism to compensate for the inefficiency in collecting the revenues and/or systematic over-budgeting. Basically, without a falling trend in public spending, without a leaner public sector, it is not possible to keep the deficit below 3pct, even with the measures in place that increased revenues as a share of the Gross Domestic Product (GDP). It is an opposite conclusion to that which we seem to draw in the absence of a strict evolution of the deficit. Fiscal rules are increasingly more frequently used worldwide. The results of their application in Romania lead to rather mixed results, in the sense that the stabilisation function of the economy seems to be almost not addressed from a fiscal point of view. Multiannual budgeting and more efficiency and prioritisation of expenses seem to be one of the solutions with great potential in reconstructing the fiscal space necessary for the two functions that the fiscal sector has: stabilising the economy and sustaining of public debt," said Cozmanca.
The Ministry of Public Finance (MFP) announced on Tuesday that the implementation of the aggregate national budget ten months into 2019 shows a deficit of 2.8pct of GDP (28.83 billion lei), as receipts amount to 261.1 billion lei, representing 25.3pct of GDP, for outlays of 289.9 billion lei, or 28.1pct of GDP.
"Outlays in the aggregate national budget decrease by 2,090.6 million lei, while and the deficit in the aggregate national budget in cash terms increased by 16,266.3 million lei. The estimated 2019 government deficit would be 4.3pct of the GDP," according to the grounds provided for in a draft ordinance on budget revision this year.
The University of Economic Studies (ASE), the Fiscal Council and the Romanian Society of Economics organised on Thursday a seminar on budgetary responsibility and macroeconomic equilibria.