Voinea: Arrears’ payment – a condition to enter the IMF board in June

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The government ruled that the funds resulting from VAT and income tax to be allotted for paying arrears and supporting the local development programmes

The payment by local authorities of arrears worth RON 1.18 bln in total is a condition for Romania entering the IMF board of June, when the preventive stand-by arrangement should be evaluated, the delegate minister for budget, Liviu Voinea said Saturday on Antena 3. “The arrears of local authorities amount to RON 1.18 bln, up from nearly RON 840 M at the end of December. There are also other overdue payments which near the 90-day deadline when they will become arrears and they will have to be paid,” Voinea explained. According to the minister, the arrangement with the Fund is of national interest, while it is also to the state’s best to pay the debts, so the economy can function. The emergency ordinance on the payment of arrears at local scale, approved by the government, rules that the funds generated by the VAT and the income tax are allotted to paying arrears. The ordinance was published Friday evening by the Official Gazette in the form approved by the government and provides that the money will be used to paying arrears, until 31 December 2013, and also for supporting local development programmes. The act also rules that the funds are allocated with priority to extinguishing arrears. It also enforces a provision which rules that, for the territorial units that have no arrears, the money is allotted to local development projects. Premier Victor Ponta said that he fully supports delegate minister for Budget, Liviu Voinea, despite the criticism voiced by the president of the Constanta County Council, Nicusor Constantinescu, as he has all confidence in local authorities, but “it is not them that are the government.” The reaction of the PM follows criticism expressed by the Constanta CJ chief over an order which he said was sent by the delegate minister for Budget, which demands the urgent payment of arrears (overdue payments older than 90 days) with money taken from local development programmes and projects that need local co-financing.The head of the IMF mission, Erik de Vrijer said end January that the arrears of some local authorities are much higher than their incomes, so they will be unable to repay the treasury loan for extinguishing debts during 2013.On the other hand, the ambassador of Germany in Bucharest, Andreas von Mettenheim said yesterday on TV that the issue of arrears in the local administration is “very serious,” and the government understood it, so it is necessary to allocate funds. The ambassador also referred to German investments in Romania, mentioning that “all we need to do is bring investors and public administration at the same table.” He mentioned that German investments in Romania are largely influenced by political stability.The delegate minister for Budget added that the economic growth of 1.6 pc estimated for 2013 is conservative and its sources will be consumption, the better absorption of European funds and the achieving of structural reforms. “What are the sources of the 1.6 pc increase? First comes internal demand, consumption. I might say that it is not the healthiest source of growth but, after a year with a growth of just 0.3 pc, stimulating consumption practically is a counter-cyclic measure and we stimulated consumption through the measures we took, also by increasing the minimum wage. Starting with the second half of this year and next years, we should see the effect upon economic growth of two other very important measures taken by the government. This is a process, not a certain day when these measures will be taken: improving the absorption of European funds and achieving the structural reforms. These two measures actually are the sustainable sources of economic growth until 2016,” Voinea explained. He added that the entire consolidated budget deficit this year will amount to RON 13.3 bln, of which RON 10 bln will be covered with European funds.

A decision over ending Romania’s excessive deficit procedure, due for May

According to Voinea, Romania is – alongside Italy – the only country that met all conditions for leaving the excessive deficit procedure that was instated three years ago, and the decision will be made in May, after the minister attended the ECOFIN meeting in Brussels last week and had talks with European Commission vice-president Olli Rehn. He added that, although only a 0.3 pc economic growth was achieved last year, the budget deficit was cut to half compared to the previous year.