Romania To Increase Ministry Budgets For Investments, Company Debts

The revision will be carried out despite the Law of fiscal-budgetary responsibility, which says the total expenses of the consolidated budget, except financial assistance from the European Union and other donors, may be increased only to pay public debt and Romania’s contribution to the budget of the EU, says the document obtained by MEDIAFAX.

The Government’s plan for the revision is paying arrears in the healthcare sector, providing co-financing for projects funded from foreign sources and providing additional funding for investment projects, which, it argues, justify an exemption from the law of fiscal-budgetary responsibility.

The state’s revenues will be raised by 3.2 billion lei (EUR757 million), including:
– RON155.2 million from profit taxes (as a result of renewed company activity in the first quarter);
– RON200 million from other taxes on profit, income and capital earnings, from legal persons;
– RON33.2 million from income and salary taxes (thanks to a 2.3% increase in average gross salaries in May 2011, compared to May 2010);
– RON650.7 million from VAT;
– RON1.43 billion from excise duties (as a result of more frequent and efficient anti-evasion controls);
– RON1 billion from non-tax revenue.

The state’s expenses will be raised RON4.1 billion, while the budget deficit will be increased by RON882.8 million.

The public pension system’s revenue will be raised by RON643.5 million (by lowering current revenues, from contributions, by RON364.4 million and increasing the state subsidy by RON1 billion), while expenses will be raised by RON643.5 million, to cover the entire value until the end of the year.

The draft revision increases:
– the Agriculture Ministry’s budget by RON910.3 million (including RON735 million to „ensure the conditions necessary” for the absorption of about EUR626 million from the European Agricultural Fund for Rural Development);
– the Interior Ministry’s budget by RON696.1 million (including RON37.4 million for the National Cadastre and Real Estate Advertising Agency’s program on European Spatial Data Infrastructure and RON12 million for minimum fuel reserves);
– the Transport Ministry’s budget by RON1.6 billion (including RON300 million for the National Road and Highway Company to pay for highway construction, RON515.6 million to finance ineligible expenses related to the ISPA programs and RON130 million to increase CFR’s share capital).

CFR’s capital will be raised by RON130 million, meaning 52.2 million shares worth RON2.5 each.

The government will also increase the budgets of:
– the Regional Development and Tourism Ministry by RON300 million (for projects run through the National Investment Company and National Housing Agency);
– the Defense Ministry by RON239 million;
– the Economy Ministry by RON140.3 million (for the „Mihail Kogalniceanu” card program and as state aid for the closing mines belonging to CNH Petrosani);
– the Labor Ministry by RON124.8 million;
– the Communications Ministry by RON21.2 million;
– the Health Ministry by RON349.5 million (to cover the budget deficit of the Single National Social Health Insurance Fund).

The health insurance fund’s income and expenses will be raised by RON291.7 million.

The document says that, given the high consumption of medicine, the commitment appropriations will be raised by RON982 million for drugs with or without a personal contribution and by RON700 million for the national healthcare programs.

The budgets of the Finance Ministry and Environment Ministry will be reduced by RON418.5 million and RON148.3 million, respectively.

People close to the matter told MEDIAFAX in mid-July that the Government will revise the budget after the IMF evaluation mission. They highlighted that the redistribution of funds to ministries will be based on how they carried out investments in the first half of the year, as well as on their need of finance. Money allotted to projects that are now overdue may be directed to other projects and ministries that made no investments will lose funds, the sources added.

Data analyzed in a meeting of the government committee on EU funds in early July revealed that the Development Ministry had a good fund absorption ratio, while the ministries of Environment and Economy had shown poorer performance.

The draft ordinance on the budget revision also provides money to eliminate the debts of certain state-owned companies. The Government states these funds will not affected the general consolidated buget for 2011. The funds will go to:
– the Transport Ministry: RON799.4 million for the debts of railway companies CFR and CFR Calatori;
– the Interior Ministry: RON302.7 million for the debts to heating suppliers;
– the Finance Ministry: RON248.1 million for local authorities, to pay VAT on purchases from public funds through ISPA projects in the water sector, when taking over investments carried out after the final requests for funds were sent to the European Commission;
– the Agriculture Ministry: RON115.3 million for the debts of the „Gheorghe Ionescu” Academy of Farming and Silvic Sciences to the state budget and RON60 million in debts from the SAPARD program;
– the Economy Ministry: RON79 million for Nuclearelectrica’s debts to the Autonomous Administration for Nuclear Activities;
– the Defense Ministry: RON12 million for Romavia’s debts.

Fund from VAT collections destined for county expenses will be raised by RON18.4 million, including RON11 million to be used to provide dairy products, bread and honey (following a „correction” in the number of beneficiaries of such products) and RON7.4 million for salaries in the special education system and in county educational assistance centers.

The Government will allot an extra RON18 million to pay the health insurance contributions for people on maternity leave, by redistributing RON10.9 million from the health insurance contribution for welfare beneficiaries and RON7.1 million from heating subsidies.

„To better reflect the expenses financed from the Labor Ministry’s budget, for national programs, public welfare institutions and social-medical assistance units under the authority of local or county councils, it is necessary to record these expenses as transfers to the local budgets and not as welfare expenses,” says the draft.

(EUR1=RON4.2246)