Prime Minister Marcel Cholaku said in Brussels on Thursday that this year’s budget deficit will under no circumstances exceed 6%, after earlier saying he hoped to end the year with a deficit of 5.7%. The Prime Minister announced that the government will adopt a new emergency resolution on reducing budget expenditures on Friday.

• “We are still trying to fit in the 4.4%. This is the goal that Romania has taken on, but we are also discussing how this deficit can be overcome. In no case will we have a deficit of more than 6%. According to customs, it should be at least 0.5% lower than last year’s 6.2%.” This was announced by Prime Minister Marcel Cholaku on Thursday in Brussels after a meeting with European socialists.

After journalists drew his attention to the fact that he had previously talked about a maximum deficit of 5.7%, the prime minister said that “nothing has changed.”

• “Nothing changed. I made it very clear that there would be no deficit above 6%, and I also made it very clear to you that they are going beyond the rule that you have to have a deficit of 0.5% lower than the previous year.
• The Minister of Finance and the MIPE technical team will visit the Commission again next week for clarification.
• Tomorrow, at the government meeting, I will adopt a new emergency resolution to cut budgets at both the central and local levels. Our priority remains very clear not to exist, and at the moment, if we take these measures, there is no risk in terms of blocking European funds,” Çolaku said.

Prime Minister Marcel Ciolacu said last week in Kyiv that Romania’s budget deficit could rise to 5.7% this year as a result of the implementation of the law on fiscal and budgetary measures, for which the government took responsibility in parliament.

What kind of spending cuts does the new emergency order provide?

The new emergency decree, which Çolaku announced for the government’s approval on Friday, October 27, aims to limit spending in November and December on average for the first 10 months of 2023, HotNews.ro reported. on Tuesday, October 24.

The government wants to take these new measures to reduce budget spending because, historically speaking, the deficit rises sharply in the last two months of the year.

Project GEO year-end cost reduction measures – click to open

In principle, it will no longer be possible to spend more money on:

• Items of furniture and goods and services for maintenance and operation;

• Current repair;

• Goods of the nature of commodity and material values;

• Books, publications and documentary materials;

• Consultations and expertise;

• Professional training;

• Research and studies;

• Contributions of local public administration to the implementation of works and services of local public interest based on conventions or association contracts;

• Other expenses, with the exception of the “Rent” and “Collection of budgetary requirements” sections;

• Associations and foundations, with the exception of obligations aimed at the spheres of “Health care” and “Social assistance”.

Excluded are expenses for medicines and sanitary and hygienic materials, medical services, expenses for health activities and programs, as well as expenses related to units of pre-university and university education.

In well-founded situations, depending on the development of the budget deficit in 2023, the Government of Romania may approve, on the basis of a memorandum, the exceeding of payment limits under the item of budget expenditures “Goods and services”, initiated by the main managers of loans, and in the case of subdivisions/administrative-territorial units, by the initiator of the Ministry development, public works and administration – upon their justified request.

No festivals and festivities funded by city halls, except for donations

Also, city halls will not be able to finance the organization of public events, such as festivals, concerts, local competitions, holidays, themed holidays, but not limited to them, with state funds, except for donations and sponsorships.

In addition, expenses for events caused by days declared as official days of administrative-territorial units, as well as expenses for events caused by the end of the year, are exempted.

Investment blocking

The draft also stipulates that institutions will no longer be able to legally commit to investment costs more than the average for the first 10 months of 2023.

Expenditures related to European funds and PNRR are exempted.

In justified situations, the Government will be able to make some exceptions.

For all of the above, if the person managing the institution does not comply, he will be fined 2,000 – 20,000 lei.

Avoidance of indebtedness of the National Investment Company: suspension of supply of goods and services

In case of exhaustion of the budget in the current year provided for in the budget of the Ministry of Development, Public Works and Administration for this purpose, the Ministry of Development, Public Works and Administration shall notify the CNI.

Upon receipt of the notification, CNI will order the necessary measures to be taken to avoid the registration of the debt, i.e. to stop the supply of goods, the provision of services, the performance of works or the continuation of the implementation of the investment objectives at the expense of own sources, loan sources or other sources. legally established sources.

Other activities:

• Restitution money related to the communist period that was supposed to be paid this year to the ANRP will be made from April 1, 2024.

Practically, in the period from November 1, 2023 to March 31, 2024, the issuance of payment rights by the National Body for Restitution of Property has been suspended.

• The tranches relating to 2023 from the sums provided by court decisions for the purpose of providing certain rights to wages, established in favor of the personnel of state institutions and authorities, will be provided from 2024.

• The Ministry of Labor and the Ministry of Energy will no longer provide funds for payment of energy bills from their own budgets.

• Local public administration advisory bodies can approve the use of undistributed surplus from previous years exclusively to provide funding for projects benefiting from non-refundable external funds, including those funded by the National Recovery and Resilience Plan. I make an exception to these provisions for amounts found in the surplus of previous years, for which a special purpose has been approved by regulatory acts.

• Amounts allocated from value added tax to finance decentralized costs at the county level and amounts allocated from value added tax to finance decentralized costs at the level of communes, cities, municipalities, sectors and the Municipality of Bucharest are intended to finance the payment of scholarships to students educational institutions. Unused funds of state pre-university education for the period from January 1 to August 31, 2023 are credited to the Reserve Budget Fund at the disposal of the Government for 5 years. working days from the date of entry into force of this order.

• In 2023, the main administrators of credits of the state budget, the budget of the Federal Social Security Fund, the budget of the state social insurance and the budget of unemployment insurance are authorized to transfer unused budget credits and make commitments. loans, taking into account the approved annual budget provisions.

Replenishment from the reserve fund, not rectification

To balance local budgets in 2023, the Government’s reserve fund will be increased at the expense of value added tax.

In addition, ministries and the General Secretariat of the Government may initiate draft Government decisions, which supplement the amounts of value added tax from the budget reserve fund available to the Government to finance certain Government expenditures. bodies of local state administration, which are included in their sphere of activity.

From November 1, 2023, the main creditors of the state budget who, as of October 31, 2023, register in the budget implementation department under separate names of the economic classification of the budget section payments in the amount of less than 50% of the value of approved budget credits, are obliged to submit to the Reserve Fund of the budget in at the disposal of the Government, not less than 10% of the amount of budget loans and loans for undertaking obligations, approved in the budget on this date at the request of the Ministry of Finance, within 5 days from the date of application. The transfer percentage is set by the Ministry of Finance through the request address.

This measure was taken because the Reserve Fund is empty.

Basically, given the spending cuts, any money left over goes into the Reserve Fund. In addition, the Government will give money to whoever it wants. This replaces the budget amendment.