THE DĂNCILĂ GOVERNMENT AFTER SIX MONTHSBudget deficit has increased 2.4 times

Călin Rechea (translated by Cosmin Ghidovean )
Ziarul BURSA #English Section /

Budget deficit has increased 2.4 times
Călin Rechea (translated by Cosmin Ghidovean )

Now we know why prime-minister Dăncilă was in a hurry to announce the activity report for the first six months at the helm of the Romanian government: the nice tale of the hike of pensions and salaries wasn't supposed to be overshadowed by the evolution of budget expenses, whose increase has led the deficit of the consolidated general budget to 1.61% of the GDP, from 0.88% after the first five months of the year.

In the first half of the current year, the deficit has increased 2.4 times, up to 14.965 billion lei, according to the official data from the website of the Ministry of Public Finances.

The budget deficit over the same period of last year was 6.295 billion lei, meaning 0.73% of the GDP.

The budget irresponsibility isn't limited only to the current government made up of the coalition led by the PSD, but has also been a characteristic of every prime-minister that has held the position at the Victoria Palace, since before the economic crash of 2009.

Under their "watchful" "rule", public debt has increased far quicker than the nominal GDP, which reflects an increasingly reduced ability to honor the liabilities.

Since 2009, public debt has increased almost 2.5 times until the end of 2017, whereas the GDP has only increased 1.6 times.

We shouldn't forget that this major divergence has been exacerbated amid a downward trend in interest rates, which were at historic lows in mid-2017.

Now the situation is radically different. The interest rates are on a sustained rising path, and the promotion of fiscal policies that lead to the deepening of the budget deficit, policies which are also supported by the financial repression generated by the ultralax monetary policy of the National Bank far surpasses the level of irresponsibility of the authorities.

The serious deterioration of the budget situation comes as the budget revenues increased at an annual rate of 12.6%, to 132 billion lei, and as expenses by 19%, to 147 billion. Prime-minister Viorica Dăncilă "forgot" to mention in her activity report .

In the first half of 2018, fiscal revenues decreased at an annual rate of 0.1%, to 67.95 billion, amid an increase in VAT revenues by 5,9% and a drop of 11.3% of revenues from profit, wages, income and capital gains taxes.

Why is this massive drop happening, when the economy is "booming"? But how is it "booming" without greater profits? Or did the majority of companies choose to go "underground"?

The 19% increase in total expenses occurred amid a 24.4% increase in personnel expenses, 21.7% in interest expenses, and 72% increase in capital expenses.

The financial press recently wrote that "Romanians are rushing in to work for the government", and "over 18,000 new civil servants have appeared on the payrolls of the public administration in the last year", namely "one quarter of Romania's employees are working for the state".

When faced with these statistics there is nothing left to say.

Expenses accrued out of 4 budget chapters (staff, goods and services, interest and subsidies) have accounted for more than half of the current expenses of the budget, which have amounted to 140.5 billion lei.

That is where the "resources" to drastically cut spending could be found, as the attempts to raise the budget revenues by raising taxes would represent a huge mistake for the government.

According to data from the Government's website, the 2018 budget was built around an economic growth of 5.5%, an annual inflation of 3.1% and a budget deficit of 2.97% of the GDP.

None of these hypotheses is realistic. The yield demanded for government bonds has increased at an accelerated speed at the end of the first semester of 2018 compared to mid-2017. For the certificates with a 6-month maturity the increase was 5.8 times, for the shares with a 1-year maturity four times, and the return of 10-year bonds has increased 1.3 times, to 5.3%.

The accelerated increase of the budgetary imbalance will lead to the increased pressure of borrowing costs across the entire economy and the severe deterioration of investor and consumer confidence when it comes to the fulfilling of the objectives in the governing program.

Unfortunately, that seems to be a secondary issue for the temporary and incompetent occupants of the Victoria Palace.

I found the government's report on the budget deficit after the first six months of 2018 on the website of the Ministry of Finance at around 13:00 yesterday. A few hours after the information appeared in BURSA, all the documents that were dated July 25, 2018 disappeared.

Who is the government trying to fool? Don't they know that information that has appeared on the internet doesn't disappear through an emergency ordinance?

Somebody, probably the one in charge of miracles in the government coalition, needs to urgently do something.

Since when can reality not obey the sick fantasies of economic illiterates?


After the newspaper had gone to the printer's, the budget execution appeared on the website of the Ministry of Public Finances.

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