BUCHAREST (Reuters) – Romania’s centrist minority government will raise child benefits in smaller increments from August, Finance Minister Florin Citu said, one of several social spending hikes out of parliament that are pressuring a rising budget deficit.
The former ruling Social Democrats, parliament’s biggest party, spearheaded a bill that doubles state subsidies for schoolchildren, piling pressure on a cabinet already grappling with the economic fallout from the novel coronavirus epidemic.
“It is a bill without a funding source,” Citu told private television station Realitatea Plus late on Monday.
“The prime minister will announce (by how much child benefits will rise). It is around 15%, but we will not stop here, we will have another hike in January.”
Citu said the smaller hike could be approved through a government decree later this week.
Even before the pandemic, Romania was struggling with a rising budget deficit, and a 40% pension hike effective Sept. 1, also approved last year by the previous government, has prompted warnings of credit rating downgrades.
The government also plans to raise pensions by a smaller percentage through a decree in mid-August.
The government has estimated the budget deficit will jump to 6.7% of gross domestic product this year while the economy will contract by 1.9%. All three major credit agencies have Romania on their lowest investment grade with negative outlooks.
(Reporting by Luiza Ilie; Editing by Kim Coghill)
