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Presidential adviser Cosmin Marinescu claims that the record volume of commitment loans represents this year's budget problem, pointing out that this 'parallel budget' will keep in place or will deflate the current spending in the future.
"Consequently, the higher the commitment loans provided at present, the greater the pressure on the future budgets, through the payments to be made on account of expenditures incurred in the past. That is precisely the problem of the 2017 budget, that is a record volume of commitment loans that will press strongly on future budgets. Once inflated in the present, this 'parallel budget' will keep in place or will even deflate the current spending in the future," wrote Marinescu on his blog on Friday.
According to him, the general consolidated budget for 2017 foresees commitment loans of 53.5 billion lei, which means more than a third of the state budget size, and, of these, 36.5 billion lei are commitment loans for the Ministry of Regional Development - 31 billion lei being commitment loans provided for in the National Programme for Local Development (PNDL) account.
"The commitment loans in 2017 will exert pressure on the following budgets, annually, by about 1 pct of the GDP, through the yearly increase of the necessary payments. Hence the possible slippages in the budget deficit plan. The effect of current commitments on future deficits will be overwhelming, especially if the current trend of fiscal policies is maintained, namely 'taxes down, spending up!', a trend which undermines anyway, by itself, the public finances' position," said Marinescu.
The Presidential adviser said that, beyond the deficit issue, there is the problem of local budgets' paying capacity. In this context, he shows that in cases where supplying utilities will be paid late and the works are halted, this could cause significant economic bottlenecks, including the said companies' decapitalisation.
"It is obvious that Romania badly needs investment, which would mean the expansion and modernization of infrastructure, of the networks of utilities essential for the communities' welfare. But the recent administrative experiences have shown that, in general, when the amount (allocations) increases, the quality (investments) decreases. It is not, therefore, enough to have construction yards opened throughout the country, we still need to see what the money will be spent on. And we come to the issue of the quality of public investment, which has recently become a source of folklore, including in the current governmental communication: sports on slopes, dry ice rinks, gondolas that don't move, etc. We eventually get back to the quality of the budget design, which must include scenarios of budgetary implications of the commitment loans as well as the administrative capacity to ensure the effectiveness of public spending. In both respects, we are still at the design stage," concludes Marinescu.
