“We will allow a slight relaxation of the cash deficit target to 2.2% of GDP,” Franks told a news conference, adding that the budget gap under ESA95 European standards will remain comfortably within the 3% of GDP target.
Speaking at the wrap-up of the IMF’s fifth review mission in Bucharest, Franks said a more relaxed deficit target should allow Romania to finance part of a 15% wage restoration in the public sector.
However, the money will not be enough for a total restoration of the public wages, because the government also decided to refund a series of social security contributions in the public pension sector.
Wages in the public sector were reduced by 25% in July 2010, as part of a government austerity package aimed to cut spending and bolster revenue. The authorities in Bucharest allowed a 15% wage restoration last year and announced a further 8% salary bump as of June 2012.
The remaining 7% will be restored in 2013, Franks said.
Joint teams from IMF and the EU arrived in Bucharest April 24 to assess the country’s progress under a EUR5 billion precautionary loan agreement.