Romania Will Likely Meet H1 Fiscal Targets, But Capital Spending Still Low – Franks

Finance Ministry data shows that the budget deficit stood at 1.36% of the GDP in May, while revenue rose 10% on the month and expenditure declined 3.4%. At the same time, investment narrowed by 5.4%.

"While lower current expenditure is good news, lower capital expenditure is not such good news. We want more capital spending if it is EU-related. (...) It is still a need to improve the EU absorption. There is no doubt about that," Franks said.

He added budget data is better than forecasted in the precautionary agreement, which means the targets set for the first half of the year will most likely be achieved.

For the end of this year, Romanian authorities pledged to keep the budget gap below 4.4% of the GDP.

The International Monetary Fund Board on Monday approved the first review of the precautionary up deal with Romania and will make the second tranche available, worth around EUR480 million.

In March, Romania and the IMF signed a EUR5 billion loan agreement, successor to a larger EUR20 billion bailout package that ended in April this year. Under the new deal, the IMF will disburse Romania EUR3.5 billion, while the EU and the World Bank contribute with EUR1.4 billion and EUR400 million, respectively. However, Romania will access the funds only in case of economic distress.

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