Friday, July 31, 2009

Romania to Ask IMF to Allow Wider Budget Deficit

By Adam Brown
July 30 (Bloomberg) -- Romania’s government said it will ask the International Monetary Fund to allow it to widen its budget deficit limit for 2009 to make up for dwindling revenue.

The Balkan nation, which has agreed to a budget-gap ceiling of 4.6 percent ofgross domestic product this year, is holding talks with the IMF this week and next, Finance Minister Gheorghe Pogea said in a note on the government Web site.“Revenue fell 5.1 percent in the first half compared with a year earlier because of the financial crisis,” Pogea said. “We want to advance the idea of a wider budget deficit at least to make up for the drop in income.”Romania agreed to a 20 billion-euro ($28 billion) loan package led by the Washington-based lender in March to finance its current-account and budget shortfalls.

The IMF agreement target compares with a deficit of 4.8 percent last year.A team from the IMF started a week-long visit to Romania yesterday to discuss the government’s economic plan and review terms of the loan. Pogea didn’t say how much he wants to widen the budget gap.The government has already frozen wages for state workers, raised some taxes and created a new tax on many service providers, including restaurants and hairdressers.Pogea also said that the government registered a budget deficit of 2.7 percent of GDP in the first half, on target with the IMF’s plan.

In the first quarter, Romania’s economy shrank an annual 6.2 percent after growing 7.1 percent last year, the fastest pace in the European Union. The IMF predicts the economy will contract more than an annual 4.1 percent this year.

To contact the reporter on this story: Adam Brown in Bucharest atabrown23@bloomberg.net

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