The state is keeping a tight lid on the budgetary deficit

The Finance Ministry has so managed to keep the budgetary deficit under control, with the gap widening by almost one percentage point to around 6% in GDP (30bn RON) in November, according to Finance Minister Gheorghe Pogea. However, there is the risk that the state has not honoured its expenses to the private sector, as some companies have charged in the past months.

Under the circumstances, the budgetary deficit target of 7.3% in GDP agreed on with the IMF for this year seems attainable, despite the downbeat estimates of analysts and financial institutions in recent months, which pointed to a level closer to 8% of GDP.

Gheorghe Gherghina, a secretary of state with the Finance Ministry in charge with the budgetary policy, explained that normally December would not be different from November so that the 7.3% target should be hit. "Should budgetary revenues match the November level and expenses be 3bn RON higher, we'd still reach the 7.3% target," Gherghina said.

This November, budgetary revenues reached 12.1bn RON, above the level posted in the same month of last year, while expenditures came to 16.3bn RON.

The November development points to a reversal of the budgetary revenues collection trend in the context where budgetary revenues totalled 15.3bn RON (3.64bn euros) in October, below the level of October 2008, of 16.7bn RON (3.97bn euros).

Beyond the high budgetary deficit, the main problem is the earmarking of some very high sums for social expenses and wages, accounting for around two thirds in total public expenses, and the dynamics of these expenses.

Given the high level of the budgetary deficit, the urgent problem is the difficulty to finance it. In the first half of this year, the Finance Ministry put pressure on the domestic market, borrowing aggressively in July for periods of just a few days.

The prolonged political instability has delayed the approval of the 2010 budget and structural reforms.