Thursday, July 17, 2008

Romania hikes spending, keeps budget deficit goal

BUCHAREST, July 16 (Reuters) - Romania increased its spending plan for this year in a budget revision on Wednesday, but left the deficit target unchanged at 2.3 percent of the gross domestic product, the government said in a statement.

The finance and economy ministry has said more spending was possible without hurting the deficit goal thanks to better nominal GDP forecasts which boosts revenue expectations.

"The executive approved ... the second budget revision this year, increasing total spending to 4.4 billion lei ($1.95 billion), and the revenues plan to 3.8 billion lei," the statement said.

Almost 2 billion lei would be directed to investments in transport infrastructure.

Other funds were allocated for new sport facilities, the expansion of water pipe networks in rural areas, defence acquisitions, and increases in subsidises for farmers.

Finance minister Varujan Vosganian told Reuters earlier on Wednesday there are very high chances for a new budget revision in the fall and that he hoped the target would be kept, despite political pressure for higher spending.

Opposition parties have racked up demands for more social spending in recent months to offset the impact of soaring food and energy costs on the poorest Romanians.

But the central bank and international observers have urged Bucharest to tighten wage and fiscal policies to avoid adding inflationary pressures to the overheated economy, which beat expectations to grow 8.2 percent in the first quarter.

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