Romania : Public Expenditure and Institutional Review : Background Papers

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.