The budget revision draft increases total expenses at the consolidated general budget by 2.98 billion lei (EUR703 million), thus exceeding the RON194.4 billion ceiling approved by the parliament for 2011.
“Although the draft emergency ordinance regarding the budget revision for 2011 stipulates derogation from the article 16 of the Law on fiscal responsibility, the Fiscal Council deplores the decision to avoid the regulations set by Law 69/2010 promoting budgetary discipline,” the Council said in a statement.
The budget revision draft fails to comply with the stipulation included in the fiscal responsibility law according to which total expenses at the general consolidated budget, excluding financing from the European Union and other donators, can be supplemented via budget revisions only to accommodate the payment of the public debt and of the state’s contribution to the European Union’s budget.
The ministry’s planned revision proposes overall expenditures be supplemented by RON2.98 billion, of which RON735.5 million represent subsidies, RON236.6 million will be allocated for social assistance services, RON442.3 million for other transfers and RON12 million for other expenses.
Additionally, the draft stipulates more funds for various goods and services (RON433.2 million), capital expenses (RON320.8 million), the reserve fund (RON228 million), expenses with subsidies (RON220.8 million), expenses with social assistance (RON116.3 million) and expenses with other transfers (RON116.7 million).
The Council said that the higher funds could be partly justified by the necessity to pay arrears, but the temporary suspension of the stipulations in the fiscal responsibility law create a precedent which can lead to other slippages from the principles of a responsible and predictable fiscal and budgetary policy.
Moreover, the derogation from the rules set by the law on fiscal and budgetary responsibility will negatively affect the credibility and predictability of the fiscal and budgetary policy, thus undermining one of the goals for which the law was created in the first place.
The draft budget revision will supplement both the expenditures and revenues at the general consolidated budget, while leaving the government’s budget deficit target unchanged at 4.4% of the gross domestic product.
The authorities said the improved projection of the budget revenues reflects the higher revenue from excise duties reported for the first half of the year and the raising revenue from both the value added tax and non-fiscal items. Full-year revenues from excise duties are forecast to increase by RON1.6 billion, while revenues from the last two categories by RON550 million and RON876 million, respectively.
The Fiscal Council is an independent body which assists the government and the parliament with setting up and implementing fiscal and budgetary policies to ensure the quality of the macroeconomic policies used for budgetary projections and fiscal and budgetary policies for the medium- and long-term. (EUR1=RON4.2342)