An International Monetary Fund official on Monday praised Romania for sticking to austerity measures, saying the East European nation can afford to increase public sector wages as the economy rebounds.
Jeffrey Franks, the IMF envoy to Romania, said the government could raise salaries "in the coming months," albeit modestly, and added that he expected exports and a good harvest to help the economy to grow by 1.5 percent this year following two years' of contraction. For 2012, Franks said he expected growth to ratchet up to 4 percent.
He praised Romania for keeping its budget deficit at 4.4 percent of national income, as agreed with the IMF, and urged the government to continue reforms, saying its priorities were to improve the health system, improve the public finances and access European Union loans.
"Progress has been good. All the criteria were fulfilled," said Franks, speaking in Romanian at a news conference. He said Romanians would see the fruits of the economic recovery in the coming months.
However, the good news is tempered by the fact that wages will still remain lower than in 2010 when the government began tough austerity measures to meet the terms of a multibillion IMF loan it needed to pay salaries and pensions. The average salary in Romania is about euro320 ($455) a month after tax.
Sales tax remains at 24 percent, one of the highest levels in the EU, as the government continues to slash public sector jobs to reduce public spending.
Last week, the government said it would cut 1,300 jobs at three state-owned energy companies this year, and Interior Minister Traian Igas announced more than 9,000 jobs cuts in June, despite Parliament's rejection of the planned cuts.
In July 2010, the government slashed wages by a quarter and implemented other harsh austerity measures to meet the terms of a two-year euro20 billion ($28 billion) loan from the IMF, the EU and the World Bank, as its economy shrank by 7.1 percent.