Weakened by his defeat in the recent presidential election, Romania's Prime Minister Victor Ponta faces a new test in talks with the IMF over the 2015 budget in one of the poorest countries in Europe.
A mission from the International Monetary Fund and the European Union is expected in Bucharest on Tuesday to discuss a budget that had been delayed due to November 16's vote, which led to the surprise choice of centre-right leader Klaus Iohannis as the next president.
"The negotiations will be difficult, but on the basis of economic growth and better collection of public receipts, we should be able to build a balanced budget," said Ponta this past week, ruling out any tax hikes.
Ponta, who conceded defeat in the presidential run-off, has to convince international lenders that campaign promises such as raising the minimum wage and doubling benefits for disadvantaged children can be met while still limiting the deficit to 1.4 per cent of gross domestic product (GDP).
According to Ionut Dumitru, chairman of the independent Fiscal Council charged with monitoring government tax and spending policy, the campaign promises will create a shortfall of between USD 4.4-5.0 billion around 2.2 per cent of GDP.
The government will be hard-pressed to fill that shortfall without raising taxes or negotiating a new deficit with the IMF, said Dumitru.
Romania emerged from a deep recession thanks to an emergency loan of 20 billion euros from the IMF and EU in 2009, and in 2013 reached a new two-year accord on a credit line of four billion euros to use in case of a major crisis.
The central European country promised in return to cut its public deficit and speed up reforms.
Economic analyst Cristian Grosu said he expects to see more flexibility from the IMF, which has been criticised for austerity "cures" during the economic crisis that have hampered recovery.
