In the aftermath of the recent visit by the IMF delegation to Bucharest, the official communication from the Romanian Government starkly contrasts with the reality on the ground. While the Executive touts the delegation’s visit as a commendation of the political power’s sensational achievements, the IMF’s true message is a dire warning that Romania is on the brink of collapse and its populace will bear the brunt of it.
Government’s Optimism vs. IMF’s Caution
According to a statement released by the Victoria Palace regarding the IMF delegation’s conclusions, the measures taken by the Romanian Government last year purportedly contributed to maintaining macroeconomic stability and reducing the budget deficit and inflation beyond previous estimates. Marcel Ciolacu, representing the Romanian Government, highlighted significant solutions supported by Romania to maintain macroeconomic stability and reduce the budget deficit, including massive investments from national and European funds, combating tax evasion through the digitization of the National Agency for Fiscal Administration (ANAF), and reforming the budgetary apparatus.
Divergent Views on Fiscal Policy
Despite the Government’s optimism, the IMF delegation paints a grim picture of Romania’s fiscal outlook. The IMF projects Romania’s budget deficit to exceed 6% of GDP in the coming years due to the new pension law, necessitating efficient fiscal consolidation to restore government finance solidity.
IMF’s Recommendations
In light of Romania’s dire economic situation, the IMF has urged the Government to undertake a comprehensive reform of the income tax by eliminating remaining gaps and exemptions, lowering the threshold for micro-enterprises, and potentially increasing progressive taxes. Furthermore, the IMF has called for an increase in VAT revenues by taxing more items at the standard rate and introducing a carbon tax in the transport and construction sectors or additional excise duties on fossil fuels. Additionally, the IMF has demanded that the Bucharest Government raise property taxes and develop a mechanism for the effective extension of the fiscal burden resulting from pension reform.
Editor: Andreea Gudin
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