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January 23, 2022

Romania – WB partnership concerning Euro Zone accession

Romania is taking another step in the process of adopting the single currency, receiving the support of international financial institutions. In this sense, the leadership of the World Bank discussed yesterday the Country Partnership Strategy (CPS) for Romania for the 2014-2017 interval, Budget Minister Liviu Voinea representing the government at the launch.
“The country partnership signed with the World Bank will help Romania achieve the real convergence process in view of adopting the Euro in 2019, and will ensure the financing of the deficit at the market costs at which the financial institution contracts loans,” Budget Minister Liviu Voinea stated yesterday. Likewise, this partnership seeks to achieve structural reforms in several domains, including the public finances domain, but also in state-owned companies.
He stated that the current partnership has better qualitative bases than the previous ones, considering the progress lately made by Romania. “These confirm the fact that fiscal consolidation and economic growth can be done at the same time, that structural reforms can have results. Last year, overall, the state-owned companies’ financial results improved year-on-year by 0.4 per cent of GDP and that shows that these reforms are working even though there are still a lot of things to be done, especially when it comes to corporate governance within state-owned companies, one of the domains on which the country partnership orients,” Voinea added. Likewise, minister Voinea claims that the partnership also contains financial components, Romania being set to receive, based on the Polish model, financing for the deficit for two series of two years each, so throughout the four-year partnership.
“This will allow the financing of our deficit at the market conditions at which the World Bank contracts loans. Considering that the deficit is continuing to drop, this financing part from the World Bank will become important,” Voinea added. Likewise, according to him, the financing will go to top-priority domains, in 2014 to the health sector, in 2015 to the education sector and in the other two years the judiciary will probably be one of the top-priority domains for which there will be investments and loans for results-based sectoral investments. Last but not least, “within the framework of the partnership with the World Bank we also have a social component, the minimum insertion income, which starting in 2015 will replace other forms of social benefits, will be addressed to a wider category of people and will also be a bigger financial support,” Voinea added. He stated that at this moment many of those that have low incomes are excluded from the payment of social benefits because they own certain goods such as a television set or a plot of land, but they should not be excluded. He pointed out that the talks are not finalized and are taking place along with the Labour Ministry, and the project will be put up for public debate in the near future.
Budget rectification to be discussed with IMF in July and approved in August
The budget rectification that could also include the lowering of social insurance contributions (CAS) will be discussed with the IMF during the supplementary visit in July, and approved by the government at the end of that month or in early August, the Budget Minister added. The budget execution in the first four months points to a weaker performance for budget revenues, and the deficit of just 0.28 percent of GDP is the result of the 4 percent drop in budget expenditures compared to the same period last year, including the drop in public investments. The government however is staking on an improvement of budget revenues in May and June both from the hiking of the fuel excises and from the introduction of the special constructions tax, which will apparently bring in revenue at least twice higher than estimated.

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