The International Monetary Fund (IMF), under its annual Article IV Consultations with Romania, said that the country’s general government budget deficit may drop to 5.8% of GDP in 2026 and suggested further steps for further fiscal consolidation. The Fund’s proposed plan focuses on personal income taxation, which would generate 0.9% of GDP higher revenues by 2030 compared to 2026, out of a total 2.3% of GDP consolidation over the four years.
The Board of the International Monetary Fund also calls on Romania to implement an appropriate mix of policies and ambitious structural reforms to support growth, restore fiscal sustainability, and protect financial stability.
The IMF proposes that the 2.3% of GDP fiscal consolidation during 2027-2030 would be achieved primarily by increasing the revenues (+1.8% of GDP) and only marginally by reducing the expenditures (+0.5% of GDP).
Romania still has to deliver to the European Commission a revised version of the Medium Term Fiscal Consolidation Plan (MTFCP) after the one drafted in the fall of 2024 and approved by the Commission in January 2025 became obsolete following the major 2024-2025 fiscal slippage.
The IMF suggests a graduated personal income tax (PIT) with multiple tax brackets would help increase revenues (0.5% of GDP or more) as well as improve the fairness of the tax system.
The impact of higher PIT rates on the labour tax wedge could be moderated by reducing the health contribution, the Fund argues. The high labour tax wedge at low wages, in particular, could be further reduced with a more generous basic allowance or an in-work benefit program. Increasing means-tested social transfers to low-income families would further protect low-income and vulnerable households.
The IMF welcomes the elimination of sectoral PIT exemptions in construction, agriculture, and the IT sectors in 2025. As tax expenditures from remaining PIT exemptions, including those for pensioners, are still substantial (0.6% of GDP), these exemptions need to be further eliminated, the Fund suggested.
Strengthening carbon pricing – through higher excise duties and a predictable carbon tax trajectory – would incentivise energy efficiency and foster private investment in renewables and clean technologies, helping achieve both fiscal (+0.5% of GDP supplementary budget revenues in 2030 compared to 2026) and environmental objectives, as well as improving energy security.
A property tax reform that imposes taxes on market values while reducing exemptions would help increase revenues (0.1–0.2 % of GDP annually), the IMF suggests.
iulian@romania-insider.com
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