Romania Receives World Bank Support For Fiscal Agenda

by Ulrika Lomas, Tax-News.com, Brussels

30 December 2011

The World Bank has approved a loan worth EUR400m (USD518m) to support the Romanian authorities in their efforts to slash the nation's signficant fiscal deficit.

As part of a program supported by international financial donors, Romania's debt has slowly declined in recent years. After the introduction of numerous austerity measures, the government was able to achieve a reduction in the nation's deficit to 6.8% of Gross Domestic Product in 2010, lower than the 7.2% deficit reported a year earlier.

As part of its austerity package, the government hiked the value-added tax from 19% to 24%, the rate in force since July 1, 2010, and implemented draconian public spending cuts to bring the country's deficit onto a sustainable footing.

The loan is part of a larger financial assistance package which Romania has received since the onset of the financial crisis from the International Monetary Fund. In providing the loan, the World Bank said it would support the Romanian government's continued "fiscal management reforms... to position Romania to emerge from the economic and financial crisis on a stronger footing... and withstand better any further shocks".

Romania has already received short-term budgetary assistance worth USD17.07bn from the International Monetary Fund.

Despite its fiscal troubles, the government has said it remains committed to its flat 16% tax on personal income and companies' profits.

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