The consolidation plan is evenly split between revenue-generating and expenditure-cutting initiatives. The first wave of measures is set to take effect on August 1, 2025 with additional actions following on January 1, 2026.
A key revenue component for 2025 includes a 2 percentage point increase in the standard VAT rate to 21%, and a unification of the current reduced rates of 5% and 9% into a single 11% rate, effective from August.
“This will generate higher inflation, which will further erode real incomes,” said Fitch analysts.
Romania’s annual inflation rate rose to 5.7% in June 2025, up from 5.45% in May.
In a positive sign for investor confidence, Romania successfully issued EUR5 billion in euros and US dollars on the international bond market immediately following the fiscal consolidation announcement, attracting strong demand.
Government bond yields have also seen a decrease from their early May highs, though they remain above pre-November 2024 levels.