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December 7, 2021

Finance Ministry misses government debt targets

Following an assessment, the Court of Auditors recommends the ministry to take 10 measures, including the diversification of public debt instruments placed on the market and harmonisation of national legislation with the European law.

A Court of Auditors assessment of the government debt management has returned rather unpromising conclusions. The targets for the management of the government debt in 2008-2010, established in a strategy, included a controlled rise on the public debt, a reduction of the cost of the public debt on a medium and long term, limitation of the risk of the government debt portfolio and development of the government bond market. None of these objectives have been fulfilled and the reasons given by the Finance Ministry do not stand, say the Court of Auditors inspectors, quoted by HotNews.ro.

In the end of its analysis, the Court of Auditors recommends the Finance Ministry to take a set of measures of maximum importance. The ten measures are for the harmonisation of national public debt legislation with the methodology of the European System of National and Regional Accounts of the Community (SEC95), diversification of public debt instruments placed on the market and addressed to all categories of investors, orientation via the strategy for the management of the public debt not just towards taking loans to finance budget deficit and refinancing of public debt, but also towards external loans for the completion of priority projects/programmes. Another measure is the restructuring of the government debt portfolio towards reaching a balance between fixed and floating rate interest loans, according to market conditions, increase of the rate of recovery of sums paid by the Ministry of Public Finance (as a guarantor and/or borrower), increase of MFP’s pro-active role (as a single administrator of the government debt) in the implementation of projects financed with loans taken from international institutions and commercial banks, as well as the preparation, promotion, approval and enforcement of a code of ethic and professional conduct applicable to the staff with specific competence in contracting, managing and administering public debt. The last measures are the drafting, adoption and implementation of all applicable operational procedures in contracting, administering and managing public debt, drafting and adoption of job descriptions clearly establishing the competence and responsibilities of the specialised personnel working in the contracting, administration and management of the public debt, as well as a review of the government public debt management strategy on a yearly basis or whenever it is required by the market conditions and/or financing needs.

MFP blames the unpredictable legislative framework

The Ministry of Public Finance explained the lack of action in what concerns the review of the government public debt management strategy by the fact that there was no ‘legislative framework ensuring the predictability required for setting sustainable medium-term deficit targets’, a framework that was subsequently created by the Fiscal Responsibility Law adopted in April 2010, by the fact that ‘in October-November 2009, because of the no-confidence vote, the Government ceased to act as an Executive power’ and by the fact that the macroeconomic context and the budget deficit targets had to be repeatedly altered because of the global economic and financial crisis.

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