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Romania Faces Budget delay, Major administrative Overhaul
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Romania is bracing for a potential delay in finalizing its 2026 budget, with Prime Minister Ilie Bolojan indicating on Monday that closure in December is “very likely” unattainable, potentially pushing the process into January. This delay stems from the need for extensive legislation to ensure a “predictable budget,” according to the Prime Minister. Simultaneously, the government is preparing to take responsibility for a sweeping reform package impacting both local and central governance, potentially as early as next week.
If the state budget isn’t adopted by January 1, Romanian state institutions will be forced to operate on a severely restricted budget – limited to 1/12 of the previous year’s allocation. Bolojan outlined the government’s current fiscal position and future plans during a speech at the Association of Municipalities in Romania.
Currently, the contry is positioned to close the budget with an 8.4% deficit, with a commitment to reduce this to approximately 6% in the coming year. “We borrowed rapidly as a country in the last 5 years,” Bolojan stated, noting that total loans have surpassed 200 billion euros, with interest accounting for half of the current deficit.
The Prime Minister also hinted at potential tax increases for individuals on properties and vehicles in the coming year,acknowledging that “our budget wiggle room is pretty tight as of the budget deficit.”
Administrative Reform on the Horizon
A key component of the government’s strategy involves a significant overhaul of the administrative structure. After prolonged discussion, an agreement in principle has been reached on a comprehensive reform package for both local and central administration. The proposal centers around a 10% reduction in expenses, with local administration calculations based on Ordinance 63.
The reform aims to empower municipalities by establishing mechanisms for them to directly collect local taxes and fees. If deemed constitutional, the changes are slated to take effect on January 1, 2026, and are intended to foster greater decentralization. Municipalities will also gain increased autonomy over regulations concerning games of chance, with the freedom to ban them entirely or impose new taxes.
Investment and Funding Challenges
Despite economic headwinds, Romania has seen strong investment interest, with projects being “double oversubscribed” in the last year. The government recently completed the renegotiation of the National Recovery and Resilience Plan (PNRR), securing approvals from the European Commission and addressing over-contracted projects at the local level.
however, significant challenges lie ahead regarding the transfer of funds to local authorities. Bolojan explained that, beginning next year, the current level of transfers from the national budget to local administrations will no longer be enduring given the existing budget deficit. Any additional revenue generated through local taxes will not be required to be transferred to the state. This shift will necessitate a careful redistribution of funds upon budget law approval.
Another critical issue is the allocation of national investment budgets to authorities and ministries. The government is committed to spending the remaining 10 billion euros from the PNRR next year, which, combined with co-financing, will consume a considerable portion of the investment budget – advised not to exceed 7% of GDP. This will leave limited funding available for programs like Anghel Saligny, the National Investment company (CNI), and other ministries.
As a result, the allocation for the Anghel Saligny Program is expected to be lower in the coming year. To address this, the government is considering a transitional rule requiring 20% co-financing for projects seeking funding from the program, incenti
