A plan to reduce arrears of public owned companies

• The authorities and the IMF yesterday agreed on a plan to lower the arrears of companies

• Tănăsescu: Failing to restructure public companies that lose money would endanger the budget deficit target

The issue of the arrears of public companies was discussed yesterday by the Romanian authorities and the officials of the IMF. Sebastian Vlădescu, the minister of public finance, said that in the coming period steps will be taken to streamline the efficiency of public owned companies: "Today (Monday, ed. note) we discussed the problems of companies in which the state is a majority shareholder, in particular reducing arrears. Steps will taken to streamline the operation of these companies, and to help them cash their receivables and to determine a way to pay their debts".

Mihai Tănăsescu, Romania"s representative with the IMF, recently said that failing to restructure public companies that lose money would endanger the budget deficit target for the end of this year, which is set at 5.9% of the GDP. "I expressed this concern before and it still stands. We want to meet our budgeted target deficit by cutting expenditures and improving revenue collection, not by increasing arrears", Tănăsescu said.

Officials of the Ministry of Public Finances and of the Ministry of Transportation, and those of the IMF have agreed on Monday on a plan to reduce arrears of companies in which the state is a majority shareholder. Sebastian Vlădescu said that the management of those companies will have to meet targets for cutting arrears. "We"ll definitely have to set a cap on the level of arrears. It is a problem which I hope my two colleagues - the Minister of the Economy and of Transports - will be able to solve, in order to help Romania honor the performance criteria agreed on with the IMF", Mr. Vlădescu added.

Solving the issues of the railway system will involve cutting expenditures and revising the way subsidies are calculated, the Minister of Transports and Infrastructure said yesterday, who added that aids for companies in that sector should increase by 30-40%.

Radu Berceanu said: "I have reviewed the issues arising from the arrears of CFR Marfă, CFR Călători, CFR Infrastructură and Metrorex in 2009. We did our best to lower these expenditures. There is a problem when it comes to the price of tickets, because subsidies in Romania are a lot lower than in other countries and this causes the constant accumulation of arrears which to IMF officials look like irregularities. I think we should increase the level of subsidies". The minister said that the talks with the IMF revolved around the three railway companies and the Romanian subway company (Metrorex). "We presented the current state of these companies, what happened last year and what we plan to do this year", Berceanu said, adding that the officials of the IMF said that they do not want to force the ministry into taking unrealistic measures, they do want to see, steps "taken forward".

• Dăianu: It is impossible for the government to lower arrears in circumstances of crisis

Lowering arrears has proven to be "mission impossible" for the government last year, which is going to make it all the more harder to do so in 2010, said economist Daniel Dăianu, quoted by Agerpres. He said: "It has been impossible for the Government, in circumstances of crisis, to successfully lower the volume of arrears to the private economy. The state has liabilities which should have been paid in 2009, arrears, debts which were paid in part or not at all (...) The private economy also has arrears towards the Romanian state, public companies have a large volume of arrears as well (...) The government was faced with an almost insurmountable task, which makes it even harder for them in 2010, because, sooner or later, they will need to be extinguished".

Daniel Dăianu said that if the state had tried to pay back these debts in 2009, the budget deficit would have been far greater. "If the government would have wanted to meet its budget deficit target, it should have found ways to increase its revenues. This will remain a problem for 2010 as well. Anyway, the arrears will be carried over into 2010, perhaps even into 2011, if they are not extinguished this year", Dăianu said.

Mr. Dăianu mentioned that arrears are a recurrent phenomenon in the Romanian economy where fiscal discipline is lacking, as well as in other economies, and they return when economic conditions become difficult.

"In fact, anywhere in the world, when there is a recession or a strong crisis, the so called wild lending happens, which is an euphemism for arrears. For the Romanian stat, for the public budget, an expansion of arrears means putting off the payment of debts, which will strain the future budgets, as the greatest challenge for foreign lenders and Romania is the consolidation of the budget", Dăianu explained.