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The Fiscal Council: there is a high risk to record a budgetary deficit higher than the estimated one
The Fiscal council warned about a possible over evaluation of the budgetary income in the estimate of the budget of the government on 2017, plus a possible under evaluation of the current expense, which increases the risk of recording a budgetary deficit higher than the estimated one, of under 3% of the GDP according to a preliminary evaluation published on the site of the institution.
The draft state budget for 2017, published on Friday by the government includes a budgetary deficit of 2.99% of the GDP, an increase of the budgetary income with 31 billion lei against the last year, from 223.7 billion lei in 2016 to 254.7 billion lei in 2017 and an increase of over 35 billion lei of the expenses, from 242.02 lei last year to 278.8 billion lei this year.
As there are no correction measures, there is the risk that the government cannot observe the deficit projected of under 3% according to the Fiscal Council, the limit of 3% being imposed through the Maastricht Treaty.
‘The preliminary evaluation of the Fiscal Council shows a potential over evaluation of the budgetary income as the same time with a possible under evaluation of the current expenses, which means a strong tendency of the risks in the sense of recording a higher deficit than the projected one if there are no corrective measures’ the report says.
The representatives of the council consider this scenario as optimistic and unsuitable from the perspective of a careful budgetary construction. In the case of the evolution projected for the sums which will be paid by the European Union they are not comparable to the historic ones, as the budget of 2017 comprises the subsidies for agriculture from the European Fund of Agricultural Guarantee (FEGA) – 8.1 billion lei as well as funds for agriculture from the European Agricultural Fund for Rural Development (FEADR) – 4.1 billion lei, whose beneficiaries is the private sector.
At the same time, the updated variant of the projection of budgetary expenses, received by the fiscal council on the morning of 27 January, brings major amendments at the level of some expensens which will amplify the reserves already existent as regards the possible under-dimension of the personnel expenses and adding to it new reserves for the potential under-budgeting for social assistance’ expenses with the interest and other transfers.
Thus, compared to the initial variant, there are reductions of current expenses worth 5 billion lei for ‘ the level of other transfers (minus 1.7 billion lei, with the source of inexplicable diminution of the contribution due by Romania to the EU budget), interest (1.65 million lei) ‘ personnel expenses (-867 million lei) and’ social assistance (-821 million lei) the report says.
The president of Romania Klaus Iohannis required the summoning of the Supreme Council of Defence of the Country (CSAT) for Tuesday 31 January with a view to analysing the budget draft for 2017.