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The challenges to long run fiscal sustainability in Romania

Author

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  • Canagarajah, Sudharshan
  • Brownbridge, Martin
  • Paliu, Anca
  • Dumitru, Ionut

Abstract

Romania, along with many other countries in the European Union, faces daunting fiscal challenges. Fiscal balances deteriorated sharply following the global economic crisis, forcing Romania to implement a fiscal consolidation that was one of the largest in the European Union, but which may not be sustainable without a recovery of economic growth. Although the ratio of public debt to gross domestic product is still relatively modest, at around 35 percent, long-term fiscal solvency is threatened by the costs of funding the public pension system in the face of adverse demographic shifts over the next 50 years. Because of widespread tax evasion, the tax system in Romania is one of the least efficient in the European Union. Tax reforms that can reduce the amount of tax lost to evasion and fraud could make a major contribution to enhancing fiscal sustainability.

Suggested Citation

  • Canagarajah, Sudharshan & Brownbridge, Martin & Paliu, Anca & Dumitru, Ionut, 2012. "The challenges to long run fiscal sustainability in Romania," Policy Research Working Paper Series 5927, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5927
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    References listed on IDEAS

    as
    1. Carlos Díaz Alvarado & Alejandro Izquierdo & Ugo Panizza, 2004. "Fiscal Sustainability in Emerging Market Countries with an Application to Ecuador," Research Department Publications 4371, Inter-American Development Bank, Research Department.
    2. European Commission, 2009. "Taxes in Europe Database," Taxes in Europe Database 0001, Directorate General Taxation and Customs Union, European Commission, revised Jun 2013.
    3. Luca Barbone, 2011. "The Battle Over Private Pensions," CASE Network E-briefs 05, CASE-Center for Social and Economic Research.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Mura Petru-Ovidiu, 2015. "Public Finance Sustainability In Romania. Recent Developments," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 757-769, July.
    2. World Bank, 2013. "Reviving Romania's Growth and Convergence Challenges and Opportunities : A Country Economic Memorandum," World Bank Other Operational Studies 16036, The World Bank.

    More about this item

    Keywords

    Debt Markets; Public Sector Expenditure Policy; Emerging Markets; Public Sector Economics; Fiscal Adjustment;

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