Budget performance in Romania projected to exceed 8% public deficit with respect to GDP, as unearthed deficits in budget execution have exceeded expectations
In a statement made by Romanian Prime Minister Ilie Bolojan, as reported by Digi24, he defended the tougher-than-initially-planned measures in the second reform package aimed at reducing the country's budget deficit.
Bolojan stated that the budget's situation was worse than previously known when he took over the office. He also highlighted that soft measures cannot address the budget deficit, which is estimated to remain above 8% of GDP this year.
The Prime Minister's statement marks a marginal worsening from his previous statements in August, where an 8% deficit was mentioned. Last year, the cash deficit was 8.65%, while the ESA deficit was 9.3% of GDP.
The ESA deficit, a specific measurement used by rating agencies, is expected to be around 7.5% of GDP (in ESA terms), according to the two rating agencies that have affirmed Romania's fragile rating just above the non-investment area. The differential between the ESA deficit and the cash deficit is becoming smaller.
To address this issue, the Romanian government has passed five legislative packages within the last two months. Measures include a gradual increase in retirement age for judges and prosecutors, job cuts, salary caps in state-owned companies, and planned tax increases starting from 2026. The goal is to reduce the budget deficit from over 8% of GDP to close to 6% by 2026, unlock EU recovery funds, and avoid a credit rating downgrade.
However, the strategy of deferring payments is being used again to manage the budget deficit. This approach has resulted in a wide ESA-cash differential in the past.
The International Monetary Fund (IMF) supports these reform efforts and stresses further actions will be needed after 2027 to reach a deficit of 3% of GDP and control public debt. These packages were fast-tracked through parliament, bypassing lengthy debates but exposing the government to multiple votes of no confidence.
Ilie Bolojan has adopted several measures to reduce the deficit, attract EU funds, and correct injustices. Despite the challenging road ahead, he remains committed to improving Romania's financial situation for the benefit of its citizens.
