BUDGETING IN ROMANIA Den Haag, the Netherlands 11 November 2004 Michael Ruffner Administrator Budgeting and Management Division

Background In 1998, OECD started “reviewing” country budget systems System reviews using functions of budget and stages of budget as base Learning device – principally descriptive Romania first non-OECD non-observer country to be reviewed

General Comments System in movement –Structures and Processes Impressive reforms over a short period of time –Reforms similar to other countries Strongly legalistic tradition with ex-ante control

Fiscal Rules Government Programme –Broad political consensus about EU accession and high level macro-economic goals –Generally successful – lower inflation, general 3% of GDP deficit limit on expenditures, 29% of GDP Debt Not passed in law

The Budget First things, first … More comprehensive – fewer off budget funds, quick privatisation Budget Year + 3 year MTEF –Looks realistic Economic Assumptions –Good performance, recently –Some steps to ensure independence

Budget Reporting Monthly, quarterly, annual No Mid-year Report –Update of economic situation (already provided by National Forecast Commission Timeliness of annual report

Specific Disclosures Room for Improvement –Contingent Liabilities –Tax expenditures –Asset registry (How far, linked to accruals) Privatisation lowers risks -- Where are the ties to budgets? Loan guarantees?

Role of Parliament Lengthened but still relatively short time frame for action Rights to amend budget, can’t increase deficit Does have access to specialised staff –Two chambers work together Two tiered Committee Structure –Sectoral review followed by budget committee

Budget Execution Treasury system with 3 levels of credit holders (Ministry, Program, Street level) Ex-ante Control – “Own” control and “Delegated” control Tight rules on virement (transfers) New Internal Audit – just starting Still ability to overspend

External Audit Audit Court produces report by December Previously longer delays, but timing is still not optimal Court has improved its interaction with media Court reports to parliament, but there is no audit committee Capacity for performance audit is being developed Main audit report discussed in a joint sitting of both houses Formal vote on budget execution Parliamentary process largely formalistic

Civil Society Institutionalised consultations through Economic Social Council (CES) –Very high standard (consensus/near consensus) –Other tri-partite discussions Some academic review – especially in macroeconomic assumptions

Conclusion Solid Base of Transparency –Improvements happening rapidly –Time needed to implement and judge success of reforms Internal audit, program budgeting, accruals New disclosures –Contingent liabilities, Mid year update to parliament, reconciliation line in MTEF