After a lot of urging and prodding by the International Monetary Fund (IMF), the Government has chosen the middle of winter as the best time to start cutting losses at the state-owned enterprises, which are reflected in the quasi-fiscal deficit.
Although the Executive has postponed the official announcement of the respective measures, they actually do not leave much room for innovation, as they in fact bring new price increases for natural gases and electrical power (to take them closer to the real prices) and layoffs aimed to cut costs, as sources from the Ministry of Economy and Trade told news agency Mediafax. As the current account deficit is hard to adjust in the short run by using administrative measures, balance can only be achieved by cutting down the quasi-fiscal deficit.
"It has been noted that the current account deficit is getting closer to the amount between the fiscal and quasi-fiscal deficit. As for the quasi-fiscal deficit, the measures that can be enforced include cutting the losses posted by the state-owned enterprises, wherever this is possible, and raising the prices regulated for the output of other enterprises," the quoted sources said.
The measures will be discussed during the Government session this week.
The Executive is thinking about quarterly price increases, so that the population and the companies can bear the raises more easily. The price increases could amount to 4-5% every three months. As for electricity, its price may go up 10% early next year. However, the authorities hope the actual price increase will eventually be smaller. Following these measures, bigger social aid for heating will be granted.
Romania has committed to the European Union to raise the price of natural gases up to the level of international tariffs by the proposed accession date, namely the year 2007.
As for the mining operations, the Ministry of Economy and Trade is not looking into price increases, because they would only trigger bigger energy prices. On the other hand, the losses posted by the companies in this sector will be cut by layoffs - about 6,000 people could lose their jobs.
Next year's fiscal deficit is scheduled to account for 3% of the Gross Domestic Product. According to the quoted sources, the deficit will be lower, as the collected budget revenues will continue to exceed the target. Spending will not go down and will attempt to meet the approved parameters.
National Bank of Romania Governor Mugur Isarescu has recently announced that the current account deficit may reach 6.5% of the Gross Domestic Product this year. Under the circumstances, the central bank and the Government have agreed on a set of measures to keep the current account deficit below 6% of GDP next year.
The National Bank is planning to introduce minimal lending norms to contain the soaring consumer lending, which has prompted a surge in the demand for imported goods. According to Isarescu, the Government's strategy will help cut the external deficit by almost one percentage point of the Gross Domestic Product.
razvan.voican@zf.ro
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