BUSINESS

Gov’t cannot find ‘overnight’ the money needed to raise salaries and pensions

Premier Emil Boc yesterday commented the news published by the media these days, about the IMF recommending a raise of salaries and pensions, saying that the budget does not allow him to do so, as the government cannot find “overnight” the financial resources required by these increases. “If we do not fall into populism and setbacks, there are prospects for the future,” the prime minister said, quoted by Realitatea.net. “This is not an IMF recommendation, it is what the government said while drafting the budget. This is nothing new. We do not have financial resources. Even revolutionists are upset, but we have no alternatives now,” Boc concluded.

Yesterday, media reported that the International Monetary Fund (IMF) recommends authorities to raise salaries and pensions in the state sector. When asked by Nine O’Clock, officials of the IMF representation office in Bucharest said this was a forced, even wrong interpretation of the report. At page 20, paragraph 36, the IMF report clearly mentions “if budget conditions permit.”

Here is the paragraph of the “third Review Under the Stand-By Arrangement – Staff Report; Staff Supplement,” published on Monday: “The authorities have produced a conservative 2012 budget, bringing attainment of their fiscal objectives within reach. The decision to target a deficit of 1.9 per cent of GDP in cash terms makes the attainment of the government’s 3 per cent EU deficit target in accrual terms highly probable, with the accrual deficit likely undershooting the minimum needed. While this likely overperformance may well boost Romania’s reputation for fiscal probity in these uncertain economic conditions, it comes at a price. Freezes in pensions and salaries for 2012 will make the budget more contractionary, with attendant negative effects in domestic demand and growth. A somewhat higher deficit (still below 3 per cent in accrual terms) would still send a positive signal to markets while being less procyclical. For this reason, staff recommends the authorities consider modest increases for public employees and retirees (perhaps reflecting the cost of living) during the course of 2012 if budget conditions permit.”

Early in the afternoon, PDL vice-president Sever Voinescu said that PDL wants to increase the budget of salaries and pensions, but only if economic conditions allow it, after the first quarter of the year, and has nothing to do with the “electoral logic.”

The letter of intent to the IMF clearly stipulates a similar idea: “We will freeze salaries and pensions in the public sector. However, if economic conditions permit, we will consider salary and pension increases, but with much caution, and later this year.” The same letter mentions that farming subsidies granted from the state budget will be replaced by funds received from the EU, and implementing the reform in the health sector and the restructuring of public companies remain crucial for reaching the objectives set for 2012.

Also for 2012, the government firmly committed itself to curbing the deficit of the general consolidated budget under 3 pc of the GDP (ESA). Reflecting the need for prudence, authorities decided to set the deficit target (cash) at 1.9 pc of the GDP in 2012.

An IMF delegation, headed by Jeffrey Franks, is expected in Bucharest on Wednesday for an evaluation mission until February 6. The fourth evaluation of the agreement with Romania is to be carried out along with teams of the European Commission and the World Bank. The IMF officials are to meet political parties’ representatives, unionists, representatives of the banking business associations and representatives of the civil society.

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