Just when everybody was wondering how would the government manage to spend the extra 1.5bn euros it had scheduled under the latest budget adjustment, the Ministry of Finance announced a new expenditure increase.
The budget deficit target will be lifted to 2.7% of GDP, from the current 2.5%, toppling analysts' expectations. This will be the third budget rectification operated this year. It is based on revenue growth by 492m euros (0.5% of GDP) and pledges an increase in expenses of 613m euros (0.7% of GDP), according to Mediafax.
The announcement came as a general surprise, given the already voiced doubts regarding the government's ability to spend the money it had earmarked during the latest budget adjustment, approved in June. "While in the first seven months we had a surplus of 1.1% of GDP (one billion euros), the question is why do we need another deficit increase?" says Daniel Daianu, a former Finance Minister. In his opinion, the announcement is a pledge that the deficit target would be met and that the government would not limit public expenses.
"The rectification can be interpreted as a serious error in budget resource management," feels Florian Libocor, a financial analyst with BRD SocGen. He says that the Ministry of Finance's announcement is not justified given the short period of time that has elapsed since the last such move.
Daianu specified that the Finance minister himself, Sebastian Vladescu, and NBR Governor Mugur Isarescu have recently voiced doubts on the government's capacity to spend 2.5% of GDP over revenues, according to the latest budget rectification. "This is already the third budget adjustment, after the Ministry of Finance promised they would earmark money only after they see the projects and the destination of these sums. Let us see the projects on the table and where the money is going to," says Daianu.
