IMF: Reduce the local spending. We're willing to accept a 7.2% budget deficit

IMF representatives warned that the budget deficit might be over 8% of the GDP by the end of the current year and requested that the public spending is reduced, accentuating „the responsibility of local authorities”. The IMF officials made the statements on Thursday, August 6, during the meetings with the social-democrats and the liberals.

Jeffrey Franks, IMF delegation chief in Romania, said that the Fund does not want to impose specific measures on Romania, like sacking 20% of the staff working for the state, a report belonging to PSD shows.

„The solutions vary. Fewer rises in incomes and reducing certain expenditures are a simple and, indeed, more painful solution to reduce the budget deficit”, Franks said according to the same source. The IMF official added that the Fund will show more flexibility, in order to avoid the same mistakes it made a decade ago in Asia.

The IMF estimates that the Romanian economy will drop 8.5 or even 9% in 2009, and the budget deficit will increase over 8% of the GDP. Franks said that the IMF is willing to accept deficit up to 7.2% of the GDP. Therefore, the Romanian authority needs to reduce the public spending by 0.9%.

During the meeting with the liberals, Jeffrey Franks underlined the importance of reducing the incomes spending in the public department: he says it had reached a level which cannot be supported, namely 9% of the GDP. Other measures requested by the IMF refer to adopting the unique salary scheme and the local authorities taking responsibility for public spending.