Romania will seek technical assistance from the International Monetary Fund and the World Bank to simplify its tax system. Romanian authorities wrote in the letter of intent to the IMF that the country will keep the budget deficit within the limit of 4.4 percent of GDP in 2011 and that it will follow the policy of replacing only one out of seven employees who leave the public sector.

The social contributions will be gradually reduced, once the economic climate recovers. Reforms in education and health will continue and the resources allocated for investments will improve the absorption of EU funds, according to the document.

“By the end of April 2011 we’ll develop an action plan that includes an improved mechanism and application of control measures”, according to Romania's letter of intent to the IMF.

The increase in nonperforming loans has slowed significantly over the last quarter of 2010 in Romania, reaching 11.9 percent of the total loans in the banking system. As the economic growth will recover and the reserves will stabilize, after the first half of 2011 the banking sector is expected to regain profit, according to the Romanian authorities.

Irina Popescu, irina.popescu@romania-insider.com