There is little room for public pay increases, Jeffrey Franks says.
The privatisation program advances slower than estimated, and there is “limited” room for increases in public sector salaries, Jeffrey Franks, head of the International Monetary Fund (IMF) delegation to Romania, told the Money Channel, according to HotNews.ro.The state is readying to sell CupruMin next week, although the company is not the “main target” in the IMF program, Franks said, adding that the Fund would not allow for yet another failure of the Petrom kind to happen. While Franks expects electoral pressure to mount, there is only enough room for a modest rise in salaries. The IMF official also said that rounding up public sector salaries is prevented by the fiscal accountability law.Franks made the point that the law contains a string of stipulations among which the total amount spent on public sector salaries, a provision which shall not be modified. “We see a decline in the number of public sector employees. Then, we would see spending going down,” Franks added, whose warning comes after Traian Basescu called on the coalition government to find solutions towards “rounding up” public employee salaries from June 1 onward.The IMF Board of Directors on Wednesday green-lighted the fourth evaluation of the preventive type agreement with Romania, making available to the Romanian state tranche 5 of EUR 505 M, which brings to nearly EUR 2 bln the overall amount available, if need be. ”The fourth evaluation of the agreement and the availability of the next batch have been unanimously agreed on by the Board of Directors, who expressed positive appreciations over the measures passed and the pledge made by Government. The Board’s recommendations focused on the need for the tax consolidation process to carry on, so that the budget deficit according to the European Accountability Standard (ESA) will be of under 3 pc and structural reforms, stepped up,” Romania’s Representative to the IMF Mihai Tanasescu told Mediafax. As of this year, the IMF agreement includes budget deficit targets, with regards to bosh cash and the ESA.PM Mihai Razvan Ungureanu conveyed to the IMF and the European Commission officials his invitation to come to Bucharest so he could personally assure them of the new government going to stick to the pledges made by the former executive to the two financing institutions.Separately, higher European fund absorption rate and strict spending discipline must be Romania’s priorities, accompanied by additional measures aimed at health reform and improving fiscal administration, the IMF also says, who notes that Romania’s economy returned to growth after two years of decline, and inflation is at an all-time low. However, economic protection this year is shadowed by worsening prospects in the euro area, and staying the course of economic reform is of essence in order to cope with current uncertainties and to enhance the growth potential.While the IMF also notices the structural reform progress of state enterprises, improvements are nonetheless necessary with respect to market-oriented prices and regulations in the energy and the transport sector in order to reduce arrears, increase economic efficiency and spur economic growth.