The Government committed itself to keeping the budget deficit at around 2.2% of the GDP in 2014. On the other hand, revenues to the state budget are lower than expected and the country will register extra costs with wages, pensions and other investments next year and must identify its priorities to be able to cover expenses, Andrea Schaechter, the head of the IMF mission to Bucharest, said Tuesday..
Schaechter said Romania has a heavy tax burden on labor income and authorities must rethink the system very carefully to avoid widening the budget gap.
Now is not the right time to lower social security contributions, but the issue remains on the agenda, Schaechter said. The measure would also entail widening taxable income and Romania must consider this aspect, she added.
Prime Minister Victor Ponta said Monday evening social security contributions will be lowered by 5 percentage points in the second half of 2014 if the government finds by July 1 the financial resources needed to offset the measure’s impact on the budget.
Joint teams from the IMF and the European Commission arrived in Bucharest on October 22 for the first review of Romania’s progress under a EUR4 billion loan program approved earlier this year.