Final vote on the state budget law

The Plenary of the Parliament is to express itself today through a final vote on the state budget law and the state social insurance budget law, normative acts that were debated last night and voted on articles and annexes, in the meeting of the Chamber of Deputies and the Senate, which started after the edition closed.

The budget reached the plenary session of the Parliament after being debated and voted on quickly, for two days, in the combined budget, finance, banks, but also in the specialized committees, for each individual ministry. This haste of the PSD-PNL majority coalition reached an embarrassing point in yesterday's debates in the specialized commissions, where opinions were given on a conveyor belt, after discussions of 5 or at most 10 minutes on the budgets of some ministries and public institutions. The fast-forward debate was criticized by political opposition MPs, who proposed around 5,000 amendments - most from the AUR and 400 from the USR - resulting in a 12,000-page volume for the draft law on the state budget. USR parliamentarians accused the Government of overestimating revenues by 20 billion lei, and Kelemen Hunor, the president of UDMR, stated that the current governing coalition would have built a catastrophic budget for next year. The UDMR leader claimed that we are witnessing a first, namely the fact that the Government will take 12 billion lei from local budgets, from income tax, dividend tax and pension tax, money that until now was collected in local budgets. From next year, the respective amounts will be collected directly in the state budget.

Almost all the submitted amendments were voted down by the PSD-PNL majority in the parliamentary committees, with only a few amendments formulated by the senators and deputies of the two governing parties being approved. Following the approval of such an amendment, submitted by the liberal Alexandru Nazare, former Minister of Finance in the Cîţu government, the Government ran out of money to organize the four elections that must take place next year. Through Nazare's amendment, one billion lei allocated to the organization of the European parliamentary, local, parliamentary and presidential elections were also redistributed within the budget of the Ministry of the Interior to the National Anti-Drug Agency (300 million lei) and for border security (700 million lei), although the secretary of State Daniela Pescaru drew attention to the fact that there is no money left for the elections. In order to correct the error made by approving the amendment initiated by Nazare, the parliamentarians from the PNL and those from the PSD approved in the assembled committees that the money needed to organize the four rounds of elections in 2024 should come from the reserve fund made available to the Government.

• 60% increase in the budget allocated to Education

According to the act initiated by the Government, the state budget for next year should be focused on investments, their value amounting to about 7% of the GDP, foresees an economic growth of 3.4% and a deficit of 5% of the Gross Domestic Product.

The ministries that will benefit from a budget increase compared to 2023 are the Ministry of Education, the Ministry of Health and the Ministry of Development. The Ministry of Education will receive 57 billion lei, an increase of over 60% compared to 2023, the Ministry of Development will receive over 12 billion lei, 50% more than the previous year, and the Ministry of Health will receive 18 billion lei, with over 40 % more, while the National Health Insurance House will have a budget of 60 billion lei for the National Health Insurance House, which means a 5% increase. Even with a bigger budget, there will still not be enough money for Health, as Minister Alexandru Rafila declared in Parliament: "At the House (ed. - National Health Insurance House), compared to the initial budget that existed at the beginning of 2023 is an increase of 22.5%, but obviously, as happens every year, additional amounts will be needed, especially for the last quarter, because that is what happened this year as well" .

Among the ministries that will benefit from a budget increase is the Ministry of Labor and Social Solidarity. Simona Bucura-Oprescu, the Minister of Labor said before the parliamentary committees: "The budget for next year has an increase of 13.3%." We have an increase from 66 billion to over 75 billion lei, which means that in 2024 Romanians will receive their rights from the Ministry of Labor and Social Solidarity. It is pension money, it is money for all the other increases foreseen in the budget".

A budget of 95.22 billion lei (commitment credits) was allocated to the Ministry of National Defense, increasing by 44.68% compared to this year's preliminary execution, which was 65 billion lei, while the Ministry of Energy loses 5% compared to 2023. Minister Sebastian Burduja said: "The budget of the Ministry of Energy is 8 billion lei, of which we have 4.4 billion lei from the state budget and own revenues, respectively 3.56 billion lei from the Fund for Modernization and The national investment plan".

The Ministry of Foreign Affairs will have a total allocation of 2.8 billion lei, while the Presidential Administration will spend 10% more than in 2023.

The Ministry of European Investments and Projects will have a budget allocation of 46.9 billion lei - commitment credits, up 7.45% compared to 2023, and 8.6 billion lei - budget credits, down 38.4 %.

Regarding the Ministry of Agriculture and Rural Development (MADR), the budget allocation for 2024 amounts to 34.4 billion lei in commitment credits and 26.19 billion lei in budget credits, which means a 25% increase in the value of commitment and 12% of the value of budget credits, the total allocation amounts to 2% of the Gross Domestic Product estimated by the Government for next year. Moreover, the social-democrat Florin Barbu, the Minister of Agriculture, managed to introduce an amendment that was approved in the assembled committees, an amendment that provides for the redistribution of 268 million lei from the budget for the payment of compensation to farmers who were affected by the weather phenomena unfavorable in the fall of 2022.

• The Fiscal Council: The Government overestimates revenues by 19 billion lei

The budget construction for the year 2024, which has in mind a cash budget deficit target of 5.0% of GDP, has a big problem regarding the budget revenues estimated by the Government, the Fiscal Council claims in the Opinion published yesterday regarding the state budget law.

The members of the Fiscal Council state in the 81-page document: "Regarding the ex-ante inclusion in the budget projection of hypothetical revenues of 19 billion lei, coming from the desired improvement of the efficiency of ANAF collection/digitalization, the Fiscal Council cannot take them into account by virtue of the principle of prudence. Consequently, the Fiscal Council considers it possible to collect revenues that are lower by about 19 billion lei, representing about 1.1% of GDP, compared to the targets assumed in the draft budget".

Moreover, the Fiscal Council specifies that during the next year, an additional 4.5 billion lei (0.26% of GDP) will be needed in the allocations for spending on goods and services and for social assistance, compared to the estimate made by the Government in the state budget law.

At the same time, the quoted document specifies that the Government's estimated deficit of 5% of GDP for next year will not be achieved and that, in reality, we will have a cash deficit at the end of 2024 that will be around 6.4 % of GDP.

In the cited Opinion it is mentioned: "The assessment regarding the cash deficit takes into account the information provided by the Fiscal Council, uncertainties regarding the final form of the measures adopted by the authorities and the assumption that there will be no forced reduction of expenses. Under these conditions, the Fiscal Council signals the existence of major risks regarding the consolidation process, according to the current budget structure. (...) The Fiscal Council appreciates that, in the absence of sufficiently concrete and credible policies to support the achievement of medium-term fiscal-budgetary consolidation on the revenue side, but also to increase the level of collection, the balance of risks is clearly tilted in the direction of registration higher deficits than those foreseen by the fiscal-budgetary framework for the period 2025-2027".

The members of the Fiscal Council claim that "in the situation where the budget deficit targets for the period 2024 - 2027 remain high, and the favorable differential between the real economic growth rate and the cost of financing, represented by the real interest rate, decreases, it is expected that the share public debt in GDP to maintain its upward trend and exceed the level of 50% of GDP in the coming years".

In the conclusions of the issued document, the Fiscal Council shows that Romania's most acute problem (along with external deficits and institutional weaknesses) is the budget deficit which, in 2023, will remain around 6% of GDP.

The text specifies: "Correction of the deficit must be done, mainly on the revenue side. In an EU state with extremely low tax revenues of around 27% of GDP, when the EU average is over 40% of GDP, with massive and chronic underfunding of education and public health, with tax evasion and avoidance of the payment of fees and taxes almost institutionalized, with a gap in the collection of VAT of over 36% compared to the EU average of around 5%, this is the common sense, logical alternative. Romania must spend more efficiently and that is why spending reviews are necessary, as they are done in the OECD. For 2023, similar analyzes were developed for health and education. The fiscal measures, adopted by the Government in 2023, would have an impact of around 1% of GDP in 2024. Additional measures are needed to bring the budget deficit to 3% of GDP in a few years".

The Fiscal Council also states that the failure to make a credible adjustment, substantiated by transparent measures, which corrects the existing shortcomings of the current fiscal framework (regressiveness/high fiscal evasion, also determined by the defective legislation, but also by the inefficient institutional architecture) can lead to disorderly developments of the economy .