Thursday, December 19, 2013

Romania president signs 2014 budget into law

(Reuters) - Romania's President Traian Basescu signed the 2014 state budget into law on Wednesday after the government agreed to postpone enforcing an excise tax on fuels he had opposed, paving the way to unlock an IMF-led aid deal review.

The government negotiated the 4 billion euro facility with the International Monetary Fund and the European Commission several months ago and the Fund completed its first review in November, agreeing a 2014 budget plan that includes some increases in state wages and pensions, but also raises some taxes, and enforces a new levy on fuel.

The IMF's executive board had been due to formally approve the review this month, but the Fund postponed this after Basescu said he would not ratify it until the excise tax was removed from the budget.

Under Romanian legislation, the president gives the central bank and government officials a mandate to negotiate and sign letters of intent with the IMF.

On Wednesday, the leftist government of Prime Minister Victor Ponta, a political rival of centre-right Basescu, said it would postpone enforcing the new excise tax by three months. An IMF mission is due in Bucharest in January.

"When the mission from the IMF and European Commission comes in January I will be ... responsible for explaining why introducing this tax would be an error," Basescu told reporters.

"I am convinced the tax can be avoided completely and this will be my objective."

Basescu said the three-month delay would generate a loss to the state budget of 600 million lei ($184.25 million).

Romania's economy is expected to grow a little over 2 percent this year and next, but the country remains the EU's second-poorest. Its infrastructure is under-developed, many people lack basic amenities such as indoor plumbing, and governments have struggled to tap EU development funds.

Romania does not plan to draw on the funds from the aid deal, but it acts as reassurance for foreign investors against potential fiscal slippages in 2014, an election year. ($1 = 3.2564 Romanian lei)

(Reporting by Luiza Ilie; Editing by Alistair Lyon)

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