The release of the 5-month budget deficit in Romania aroused a noisy political debate in Romania as the numbers appear worse than expected and opposition parties seized the opportunity to request the resignation of the Finance minister Eugen Orlando Teodorovici.
Romania’s general consolidated budget, which includes fiscal and social budgets of the government, registered a deficit of RON 14.7 billion in the first five months of this year, or 1.4 percent of estimated GDP, which was 80.6 percent higher than the deficit recorded at the same time last year, on the back of soaring public wage spending (+24.6 percent), according to data published by the Finance Ministry.
“Orlando Teodorovici is the artisan of two clumsy and dangerous manipulations for the country’s economy: he falsified economic forecasts and built a phony budget that cracked before mid-year; he has fooled the population that by renouncing to ROBOR, bank loan interest rates will fall,” Raluca Turcan, Vice President of the main opposition party PNL, wrote on his Facebook page.
Another opposition party, PMP, claims that the government is not able to control public spending.
“Romania is forced to borrow money in order to cover the payment of pensions and salaries, which are out of control,” PMP said, in a press release.
Budget spending reached RON 138.5 billion, 16.3 percent higher than the same period of last year, mainly driven by the increase in personnel spending (+24.6 percent) due to the increase of wages in the public sector.
Experts are particularly concerned about the rapid increase of government’s interest expenses. Last year, interest expense rose by 27.8 percent up to RON 12.9 billion.
The trend continued this year as interest expenses increased in January-May by 13.7 percent year-on-year to RON 6.3 billion as the government struggles to borrow at higher costs.
Romania is the EU member state which pays the highest interest rates for its debt.
Romania’s sovereign 10-year bonds yield, a barometer for the cost of financing in the economy, is now close to 5 percent, amid growing concerns regarding the health of public finances.