The International Monetary Fund underlines the need for further improvements in fiscal transparency, as there are high GDP forecasting errors, on average around 4% of GDP, weaknesses in the evaluation and oversight of public investments and lack of timeliness in approval of annual budgets, according to the report.
The Fund showed Romania is rated as good or advanced on 15 of the 36 dimensions in the Fiscal Transparency Code, while 15 dimensions other are rated as basic, and 6 regarded as yet to be achieved.
A further five dimensions are regarded as not met, while one dimension was not assessed – Public-Private Partnerships (PPPs) – given the absence of signed PPPs at the time of the evaluation.
The IMF considers three categories, namely fiscal reporting, fiscal forecasting and fiscal risk.
For the first category, Romania is rated as good or advanced with respect to the coverage and classification of fiscal reports and the integrity of fiscal statistics. However, Romania’s large public corporations sector, with expenditure of around 10% of GDP, remains outside any consolidated fiscal report.
The IMF also notes that although the government reports large volumes of information on its operations and assets, these are not consolidated within financial statements produced in accordance with international standards.
Romania’s macroeconomic forecasting, medium-term budget framework, fiscal legislation and objectives, and fiscal council are all rated as good or advanced.
Fiscal risk management is evaluated as advanced or good in identifying and reporting government guarantees and risks associated with local authorities but reporting on other specific risks, such as financial sector exposure and environmental risks, is limited, as is analysis of the potential fiscal impact of changes in the highly volatile macroeconomic environment.
The IMF recommends Romania to expand the institutional coverage of fiscal reports to include the wider public sector, improve the quality and integrity of fiscal reports and financial reports, include more detailed macroeconomic forecasts in key budget documents, increase the transparency of budget documentation and extend the analysis and reporting of fiscal risks.
The Fund also noted Romania has adopted several reforms starting 2010, which have improved the coverage, quality and frequency of general government fiscal statistics.
The country’s fiscal transparency evaluation was carried out at the request of the Romanian government by a team from the Fund’s Fiscal Affairs Department in February 2014.