ECONOMY FINANCE&BANKING

Government adopts second budget adjustment this year. Anca Dragu: It’s a positive adjustment that reflects the economic growth and the efficient way public funds were managed

The Government has adopted this year’s second budget adjustment, Finance Minister Anca Dragu announced on Wednesday. She pointed out that this is a positive adjustment which reflects the “efficient way” public funds were managed, as well as the economic growth.

The Government has adopted the second budget adjustment this year, which includes supplementary financial allocations, with the priorities being healthcare, investments, agriculture and policies and programmes financed from local public administration budgets, a communique shows. The budget adjustment makes available the sums needed for the full payment of social welfare – child rearing indemnities, welfare, child benefits, indemnities for persons with disabilities –, the payment of public sector salaries, as well as the payment of recalculated military pensions and the reimbursement of due sums.

Likewise, the Government adopted the adjustment of the social security budget for 2016, ensuring the funds needed for the full and timely payment of social security rights.

The adjustment sought to maintain the macroeconomic balance and the budget deficit target at 2.8 percent of GDP in cash terms, namely 2.95 percent of GDP in line with ESA methodology. The economic results registered so far argue in favour of attaining an economic growth level of 4.8 percent, in contrast to the 4.1 percent estimated at the time the state budget was drafted, and a gross GDP worth RON 758.5 billion in nominal terms, in contrast to the RON 746.6 billion initially estimated. Likewise, the number of unemployed persons is estimated to drop from the 450,000 initially estimated when the budget was drafted to 429,000 at year’s end. The average salary is on the rise, from RON 2,681 at the time the budget was drafted, to an estimated RON 2,815 at year’s end.

The budget adjustment considered the redistribution of funds that can no longer be spent by the end of this year, to ensure the financing of ongoing public programmes and policies.

Projects financed with post-accession EU grants, 2014-2020 financial framework, are hiked by RON 1.02 billion.

For the healthcare domain, commitment appropriations worth RON 2.21 billion have been allocated for the budget of the National Health Insurance Office (CNAS), in order for it to award new cost-volume-result contracts for the chronic hepatitis therapeutic domain. These allocations will allow patients diagnosed with stage F4 hepatic cirrhosis to continue their treatment, and will allow for the treatment programme to be expanded for patients diagnosed with stage F2 and F3 hepatic cirrhosis. The Health Ministry has already sent the necessary paperwork to CNAS. On their basis, the Office will start negotiating with pharmaceutical drug producers the signing of the cost-volume-result contracts. The signing of the contracts in this formula allows for a judicious use of health insurance budget funds because CNAS reimburses the cost of the treatments only for patients who were cured as a result of the therapy.

At the same time, the Health Ministry has identified savings worth approximately RON 0.26 billion, namely RON 260 million, mainly from expenditures on the salaries of central ministry personnel and from the funds earmarked for the procurement of SMURD ambulances. The funds made available by the Health Ministry will enter the budget reserve fund placed at the Government’s disposal, to be used in unforeseen situations. Thus, with this increase, the Government’s reserve fund will reach a level of around RON 380 million.

This budget adjustment sees the Agriculture and Rural Development Ministry’s budget increased by RON 1.09 billion. Apart from this sum earmarked through the budget adjustment, supplementary financial resources worth RON 1.7 billion were allocated for the ministry in November, through the reallocation of sums from other main credit release authorities, in line with the state budget law for 2016. The RON 1.7 billion the ministry obtained through reallocations will be used for down payments related to the direct payment schemes financed from the European Agricultural Guarantee Fund (EAGF) for the agricultural year 2016, which are offered in proportion of 69 percent of their amount, within the limit of RON 3.8 billion (the equivalent of approx. EUR 850 million).

The funds allocated through the budget adjustment ordinance will allow the start, on December 1, of final payments related to the same direct payment schemes, within the limit of RON 1.09 billion (the equivalent of approx. EUR 250 million), representing the 31 percent remainder of their amount. The fact that the Agency for Payments and Intervention for Agriculture (APIA) will make these payments, worth a total of RON 4.89 billion, by the end of this year, will ensure the attainment of a 56 percent absorption rate of the RON 7.9 billion (EUR 1.773 billion) earmarked by the European Commission for direct payments in 2016.

The sum of RON 1.255 billion was earmarked for the financing of the Regional Development Ministry’s National Local Development Programme. The sum will cover the payments needed by the end of the year for school and road infrastructure development projects. Another RON 47.9 million were re-allocated to finance the loan agreement dubbed “Integrated rehabilitation of water supply and sewerage systems and of water treatment plants in localities with a population of up to 50,000 people.” The sum will be used to complete the project financed with non-reimbursable external loans.

The sum of RON 1.7 billion was earmarked for local budgets, sum recouped from the value added tax on financing the local public administration’s expenditures. The money will be used thus:

  • RON 170 million for the personnel expenditures of schools and high schools
  • RON 14.7 million for the “Hot Meal” pilot-programme
  • RON 101.5 million for the child protection system
  • RON 74.7 million for social assistance centres for persons with disabilities
  • RON 392.3 million for paying the personal helpers of persons with disabilities
  • RON 4.1 million for the “Fruits in Schools” programme
  • RON 6.9 million for financing the rights of special needs children
  • RON 938.3 million for the balancing of local budgets

The sum of RON 222.4 million was earmarked for the Energy Ministry, of which RON 200 million for the state aid scheme for the closing of two mines that are part of the Hunedoara Energy Holding.

The sums of RON 75.5 million was allocated for the Communications Ministry, mainly in order to hike the registered capital of the Romanian Post.

The sum of RON 336.7 million was allocated to the budgets of the Interior Ministry, Defence Ministry and Romanian Intelligence Service, for the payment of recalculated military pensions and for the reimbursement of the difference between the pensions owed for December 2010 and those established based on law no.119/2010.

The Labour Ministry received RON 142.4 million for the full payment of social security rights (child rearing indemnities, welfare, child benefits, indemnities for persons with disabilities).

The sum of RON 66.8 million was redistributed to the Foreign Affairs Ministry, mainly for the payment of contributions and membership fees owed to the international bodies the institution is a member of.

The sums stem from the savings registered by ministries following the analysis of payments carried out in the first 10 months.

 

FinMin Dragu: We analyse possibility, feasibility of additional funds for First Home programme

 

Finance Minister Anca Dragu said Wednesday that the Government is looking into the possibility of providing additional funds for the First Home programme designed for first-time home buyers, for the end of the year, adding that she was surprised by the high demand for the programme so far this year.

“There is high demand for the last part of the year. We are currently assessing how real the demand is. (…) We are currently at the level of last year in terms of funds for the First Home programme. To be honest, I did not expect demand in 2016 to exceed the demand of 2015. In 2015, we had 200 million euros in unspent funds. This very high demand for 2016 surprises all the market players. We are analysing the possibility and feasibility of additional funds for the programme in 2017 and the years after that,” Dragu told a news conference at the Government House in Bucharest.

She added that the Government will pass in a memorandum a five-year strategy for the First Home programme in the weeks ahead.

“We have noticed that the First Home programme also needs predictability. We have seen the developments in demand: there were peaks in certain months correlated with certain events. That is why we have proposed a five-year strategy so that individuals, builders and homeowners wanting to sell can draw up plans for more than one year,” Dragu explained.

 

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