Romania : Public Expenditure and Institutional Review : Main Report

Abstract

The government has embarked upon a
 comprehensive and difficult medium term program for
 reforming the public sector aimed at rebalancing the
 relation between revenue and spending and enhancing the
 efficiency and efficacy of service delivery. The Romanian
 economy has been hit hard by the global economic downturn.
 Latest estimates suggest that real Gross Domestic Product
 (GDP) may have contracted by around 7 percent in 2009,
 before modestly recovering in 2010. The severe decline in
 output has had a significant adverse effect on consolidated
 budget revenues, which fell substantially below the initial
 target in 2009. To prevent a further deterioration of the
 already large fiscal deficit, the shortfall in revenue has
 led to adjustments in spending. Consolidation of expenditure
 needs however continue in order to put public finances on a
 sustainable trajectory over the medium term. The report is
 structured in two volumes. The first volume synthesizes the
 menu of options suggested to reduce the short term gap
 between budget expenditure and revenues. It also highlights
 the key challenges and recommendations for improving
 efficiency and efficacy of spending in the sectors
 investigated. Volume two consists of the background
 analyses, with individual chapters dedicated to the fiscal
 framework; public pay; pensions; education; health; and
 agriculture. The report makes the case that, in the current
 crisis environment and consistent with experience worldwide,
 the gap between expenditure and revenue should be done
 primarily by reducing the level of current spending.