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The increase in pensions by 40%, the doubling of allowances, the premiums for doctors, the increase in the salaries of teachers, all this will make “traditional” financing of the deficit impossible, and the only way out is a new loan of the IMF, believes the former president of the Fiscal Council Ionut. Dumitru, current chief economist at Raiffeisen Bank.
“If the increases are approved, the budget will fly. Nobody will finance such a deficit (a deficit of 9% of GDP to which would be added another almost 3 points, of increases). The country rating can be lost and then the only solution to finance the deficit. There will be a new agreement with the IMF, “said Ionuţ Dumitru, quoted by Ziarul Financiar.
Even without the aforementioned increases, in 2021 the budget deficit would have started, at the beginning of the year, at 7-8% of GDP. With an increase in the pension point of 40%, with the increase in salaries, with the doubling of allowances and others, the starting point will be 11-12% of GDP, which, for the markets, is not bankable, says Dumitru.
“Markets will not finance such a deficit, especially in the absence of a recommended investment rating, or they will finance it at unbearable costs, and the solution remains a new lure for the IMF.”
Budget revenue from the budget is below 30% of GDP. Along with non-tax revenue: EU funds, etc. – Consolidated revenues reach 32% of GDP. One is to finance a deficit of 9% of GDP (our case), when you have income of 40% of GDP (like many EU countries) and another is to finance the same deficit, when you have income of 30% of GDP (again , our case), shows the economist.
The Parliament Work Committees, which are controlled by the PSD, amended the government’s emergency ordinance on budget rectification, which established an increase in the pension point as of September 1, 2020, by 14%, in instead of 40%, as indicated by a pre-crisis law. sanitary, imposed by PSD and voted by PNL, in Parliament. NLP also voted in favor of this law when opposed.
The PSD recently submitted an amendment to the bill approving the rectification ordinance. A return to a 40% increase in pensions is expected from September 1, 2020. In addition, parliamentarians have canceled, in another amendment, the extension of the deadline to increase teachers’ salaries until 2021.
At seven months, the consolidated budget recorded a 13% increase in spending and a 2.7% decrease in revenue. Therefore, the deficit is growing strongly and will reach, by the end of the year, almost 9% of GDP, without the spending increase measures decided by the PSD and the parliamentary majority.
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