ANALYSIS MODEL OF FINANCIAL

INVESTMENT AND BUDGET EXECUTION

Prof. Constantin ANGHELACHE PhD.
Bucharest University of Economic Studies, "Artifex University of Bucharest
Prof. Gabriela Victoria ANGHELACHE PhD.
Bucharest University of Economic Studies
Assoc. Prof. Mdlina Gabriela ANGHEL PhD.
Artifex University of Bucharest
Georgiana NIU PhD. Student
Bucharest University of Economic Studies
Cristina SACAL
Bucharest University of Economic Studies

Abstract
In this paper, the authors present an analysis model applicable to financial
investments and budgetary execution. The main topics approached are the analysis of
budget execution in Romania, the implementation of state and local budgets, and the
public debt. The raw data and the results of the analysis are presented with the help
of tables and charts, relevant for the analysis topics. Also, the authors propose some
measures to appease the status of the Romanian economic environment, subjected to the
effects of the financial crisis.
Key words: budget, analysis, execution, revenues, expenses

Analysis of budget execution

For the 2012 period, the executive, through the Ministry of Finance, has
prepared and submitted the budgets (the state budget and social insurance) to
parliament for approval for the next years.
The result of budget execution for 2014 was somewhat interesting, because
as would have been normal for the multitude of taxes, when their proper collection, to
lead to additional revenue for the state budget expenditures.
The budgets for 2014 ended with a deficit in the process of steady decline.
Execution of the State Budget in July of 2014, recorded a deficit of -6.6518 billion lei,
while the one in 2015, the same month it was -1 602 7 million.
The budget for unemployment insurances ended with a surplus of 240.9
million lei, the state budget for social insurances, in the same period ended with a
surplus of 313,5 million lei, while at the same time local budgets recorded a surplus
of 6358,7 million lei.
When speaking about indirect taxes, specially excises, customs taxes, added
value taxes, these revenues where not fully achieved, beceause, on one hand, the
activities for excises decreased and on the other hand, when excise increased, the
volume of physical activity decreased.
There was also a large, lets say ease, with which extemptions and rescheduling
of tax payments were approved, for a large number of economic agents.
Neither the capital income, such as the exploitation of state assets, not amounted
to an outstanding level, and receipts from repayment of loans were reduced.

12 Romanian Statistical Review - Supplement nr. 4 / 2016

 It is neccessary to undertake measures to stimulate and develop economic
activity, particularly for, small and medium entreprises (the middle class), so that they
correlated with the ability to support some sectors of national economy in the reform,
to create new jobs and lead to a decrease of the expenses made incurred by the State,
especially in the chapter of state insurances, for unemployment support.
The way of how the expenses were made from the state budget, it requires one
remark, namely that it is alarming that in most sectors of activity, but particularly in education,
health, culture, social welfare, defense, orders public and national security, expenses, in
general are reduced to the populations needs, or to those who work in these areas.
This shows that the sources from which the state budget revenues were
formed (tax, non-tax) were not always collected at the projections that were the basis
for drawing up the budget of state social insurance.
In this context, expenses were higher and had to be covered from other
sources, which will create difficulties for the next period, given that in the field of
social assistance, allowances, pensions, benefits and salaries (the main expense of
the state social insurance budget) were not increased accordingly until now and in the
future, it will be necessary to obtain new sources of revenues.
The execution of the budget, especially after the implementation of the new
tax code, which has a number of uncertainties, will be felt difficulties in the coming
period, which certainly should determine the Ministry of Finance to proceed, we
believe, in the adoption of measures to mitigate the effects of the devastating financial
crisis that is submerged in Romania:
collecting from taxpayers, of observations relating to the tax code, prior
simulation of measures to be taken and then adapt that law to the needs and
socio-economic conditions of our country;
intensify efforts to collect revenues from the state budget, local budgets and
state social insurance budget;
correction, in the sense of reducing the taxation of certain taxes that can
lead to easier collection of any amounts that a number of individuals and
businesses it owes
debt recovery from major debtors, by taking over a sum of packages of
shares of private companies in this situation and by imposing of proper
management or re-privatization of these companies (shares);
obtain additional income from privatization (we hope it to be the immediate
result of the completion of privatization) and in obtaining loans, even from
the IMF.
Of course, these measures could be projected in a broader context, in the reform
process and social protection program that the government should consider. It shouldnt
be forgotten, that now, in deep financial and economic crisis, when adding, minus and
minus it would be obtained a bigger minus that can be abysmal. Without joking, I must
say that only when multiplying minus by minus we obtain a plus. Therefore it was not
desirable that budget deficits for 2010 and 2011 to be corrected by reducing excessive
salaries and increasing taxes / charges, which will reduce consumption, tax base etc. and
will deepen the social crisis, which may have developments / effects difficult to predict.

Considerations on the implementation of state and local budgets

The state budget deficit of -1.6027 billion lei, recorded in late July 2015 is
exceeded in the level planned for the full year. 2015 has not brought much what they

Revista Romn de Statistic - Supliment nr. 4 / 2016 13

wanted, namely record surpluses. Execution of state budget situation at 31.07.2015 is
presented in the following table:

Execution of state budget

million lei
Achievements Achievements
INDICATORS 31.07.2014*) 31.07.2015*)
A. INCOME 55492,5 63151,7
CURRENT INCOME 53637,8 60488,8
Fiscal income, from which 48803,8 54397,4
Tax on gain 8552,1 9472,1
Other taxes on income, profits and capital gains from legal 642,1 618,7
entities
Income tax 13315,0 15076,1
Shares and amounts deducted from income tax -8740,0 -10084,6
Other taxes on income, profits and capital gains 250,3 347,0
Payroll tax - 0,1
Taxes and duties on property 853,6 605,9
Taxes and duties on goods and services ...
Value Added Tax 29361,0 33915,4
Amounts deducted from the Value Added Tax -9299,5 -10653,7
Other general taxes and duties on goods and services 595,8 649,7
Excise 12459,6 13515,3
Taxes on specific services - -
Taxes on using goods, authorization on using goods or carrying 439,3 518,2
out activities
Taxes on foreign trade and international transactions 371,3 412,5
Other taxes and fiscal charges 3,2 4,9
Insurance contributions 98,7 107,4
Employers contributions 98,5 107,4
Employees contributions 0,2 0,1
Non-tax income 4735,3 5983,9
Income from capital 150,9 221,1
Financial Operations 116,1 25,2
Subsidies - -
Amounts received from U.E. account payments and pre-
financing 1553,1 2060,4
Amounts under distribution 34,6 -11,0
B. EXPENSES 62144,2 64754,4
Current Expenses 60166,9 62564,8
Staff expenses 11961,4 12161,5
Goods and services 2646,7 2588,9
Interest 6310,6 5663,6
Subsidies 2475,5 2409,7
Transfers between government units 15454,8 18361,1
Other Transfers 7194,3 6270,7
Projects funded by external grants 3906,2 4522,7
Expenses for reimbursable funding programs 1098,6 282,4
Social assistance 7809,4 8397,0
Other expenses 1309,3 1426,6
Capital expenses 623,9 1029,9
Financial Operations 1723,9 1708,9
Payments made in previous years and recovered in the -370,5 -549,3
current year
DEFICIT (-) / SURPLUS (+) -6651,8 -1602,7
*) provisional data; ... = Not available data.
Data source: Ministry of Public Finance; National Institute of Statistics, Statistical Bulletin no.
7/2015.

14 Romanian Statistical Review - Supplement nr. 4 / 2016

 For other income, like the one from privatization, there are some difficulties
which lead clearly at the conclusion that the idea of privatization through asset selling
at any price it didnt played a defining role, not even in the realization of the state
budget income.
In the following period, no metter how large will be the need for income, its
neccessary to pay addittional attention on assessment based on economic efficiency of
the reform measures throught privatization, so that we would not get in a position of
alienating core values from national wealth, for modest amounts, without a view for
recovery thereafter.

Execution of unemployment insurance budget

-million lei-
INDICATORS Achievements Achievements
31.07.2014* 31.07.2015*
A. TOTAL INCOME 1157,3 1026,9
CURRENT INCOME 861,9 970,0
Taxes on using goods - -
Insurance contributions 855,4 966,4
Employers Contributions 497,2 561,1
Policyholders Contributions 358,2 405,3
Non-tax income 6,5 3,6
Financial Operations - -
Subsidies from state budget 275,0 -
Amounts received from EU/ others 20,4 57,0
TOTAL - EXPENSES 961,6 786,0
Current expenses 971,7 798,4
Staff expenses 56,3 56,3
Goods and services 24,2 19,3
Interest 0,2 -
Subsidies 1,0 1,2
Transfers between government units 216,2 136,3
Projects funded by external grants 33,4 87,8
Social assistance 630,1 480,4
Other expenses 10,3 17,2
Capital expenses 0,4 0,2
Payments made in previous years and recovered in the -10,5 -12,5
current year
Financial Operations - -
C. SURPLUS (+) / DEFICIT (-) 195,7 240,9
*)provisional data
Source: Ministry of Public Finance; National Institute of Statistics, Statistical Bulletin no. 7/2015.

Compared with the 2015 schedule excise collection, customs taxes or

tax receipts for oil and natural gas from domestic production are lower than initial
forecast.
Not to mention the fact that this policy had led to a escalation of the general
prices, on national economy, with immediate effect in the deterioration of the living
standards of the population.
So here is a subject of analysis for those who thought the state budget for 2011-
2015 that had to be focused, undoubtedly, on finding levers for faster collection of revenue
for the state budget, fiscal relaxation to gather little from many, opposite to the criterion to
take over the few and, especially, finding a balance in terms of bringing through relaxing
fiscal measures the entire economy to the surface.

Revista Romn de Statistic - Supliment nr. 4 / 2016 15

 Otherwise, theoretically, during corrections, measures to increase the taxes
when put on paper matrix will look nice, but totally ineffective of the economic process
in practice and especially on gathering activities, and there is a clear danger of flight of
underground activities and escape their control.
An element which must be given attention is expenses, like interests which
were made for public debt and is also high.
Other expenses were made, usually in available limits, but created problems for
the budget authorizing officers, who were not able to cope with actual costs.
In developing the 2015 budget the focus was on increasing consumer
spending for some sectors of the state budget. And it will be still difficult to achieve a
balance, given that the degree of dissatisfaction is also high, which implies the need
for additional funds towards balancing the budget.
A delicate situation arises on how the provisions of the state social insurances
budget were made, shown in the following table:

Execution of state social insurance budget 2015

milioane lei -
INDICATORS Achievements Achievements
31.07.2014*) 31.07.2015*)
A. Income 30382,6 32192,8
I. Current Income 22546,1 20665,0
Insurance contributions 22498,3 20607,2
Employers contributions 16628,1 14445,0
Policyholders contributions 5870,3 6162,1
II. Non-fiscal Income 47,8 57,8
III. Subsidies from state budget 7885,5 11578,1
IV. Amounts under distribution -49,2 -53,9
V. Amounts from the EU in account of payments made 0,1 3,7
B. EXPENSES 30266,1 31879,3
Current Expenses 30286,2 31899,1
Staff expenses 95,7 97,2
Goods and services 221,7 226,5
Interest 6,4 2,6
Transfers between government units - -
Projects financed by external funds (NEF) post-accession 0,2 5,4
Social assistance 29962,1 31567,4
Capital expenses 1,5 0,1
Payments made in previous years and recovered in the -21,6 -20,0
current year
Financial operations - -
C. SURPLUS (+) / DEFICIT (-) 116,5 313,5
*)Provisional Data
Source: Ministry of Public Finance; National Institute of Statistics, Statistical Bulletin no. 7/2015.

16 Romanian Statistical Review - Supplement nr. 4 / 2016

 Execution of local budgets is presented in the following table:
INDICATORS Achievements Achievements
million lei 31.07.2014*) 31.07.2015*)
A. TOTAL - INCOME 29504,0 33772,9
1. CURRENT INCOME 23494,5 26503,4
INCOME TAX 22188,8 25082,5
Tax on profit from economic operators 31,5 33,3
Shares and amounts deducted from income tax 8740,0 10084,6
Income tax 134,4 158,2
Other taxes on income, profits and capital gains 5,8 7,8
Taxes and duties on property 3016,8 3116,5
Taxes and duties on goods and services ...
Amounts deducted from the VAT 9299,5 10653,7
Other general taxes and duties on goods and services 8,1 10,1
Taxes on specific services 18,4 19,9
Taxes on using goods or carrying out activities 833,9 888,0
Other taxes and fiscal duties 100,6 110,3
NON-TAX INCOME 1305,7 1420,9
2. CAPITAL INCOME 118,7 113,8
3. FINANCIAL OPERATIONS 1675,4 2286,8
4. SUBSIDIES FROM OTHER LEVELS OF GOVERNMENT 2752,9 2870,9
Subsidies from state budget 2732,9 2842,5
Subsidies from other administrations 19,9 28,4
5. AMOUNTS RECEIVED FROM UE 1462,5 1998,0
B. EXPENSES 25962,9 27414,2
Current expenses 22384,9 24326,2
I. Staff expenses 8712,1 9627,4
II. Goods and services 5989,8 5960,8
III. Interest 444,4 347,7
IV. Subsidies 1087,4 1097,1
VI. Transfers between government units 1517,4 1628,9
VII. Other transfers 327,1 229,6
VIII. Social assistance 1809,9 2143,2
IX. Other expenses 432,1 413,2
Projects financed by external funds (NEF) post-accession 2064,8 2878,2
Capital expenses 2864,6 2557,5
X. Non-financial assets 2770,1 2493,1
XI.Financial Assets 94,5 64,4
Financial operations 824,0 661,3
Loans 0,9 14,7
Loan repayment 823,1 646,6
Payments made in previous years and recovered in the current -110,6 -130,8
year
SURPLUS (+)/DEFICIT (-) 3541,0 6358,7
Source: Ministry of Public Finance; National Institute of Statistics, Statistical Bulletin no. 7/2015.

In conclusion, we can say that the achievements of state budgets, social

security and local government was done with deficiencies, especially the state budget,
which, despite corrections could not be balanced on the whole and not fully satisfied
the urgent needs of vital sectors of activity.
We can express some feedback on the budget deficit, but the situation does
not present special news and its causes perpetuate.

Revista Romn de Statistic - Supliment nr. 4 / 2016 17

 Public debt developments
Given that the national economy is blowing hard, without perspective of
reaching a constant, be it at very low level, to meet the demands of increasingly large
budget execution, internal public debt accumulates.
Rising public debt in Romania would not be a particularly difficult in the
context in which there is a forecast, even on short or medium term, regarding the
identification of real income, to be attracted to the state budget.
In other circumstances, such as those now, in which the budget revenues are
exceeded by the expenses set by the state budget, the budget is balanced by increasing
domestic debt and foreign debt.
This domestic public debt is serious interest-bearing, especially now, in the
context of the global financial crisis, which, on one hand, in the coming period will
increase, and on the other hand, spending from the state budget, will lead to higher
prices for population life. It is essential that, at present, domestic public debt reached
a higher level, for which the government will have to pay and interest. To cope with
the need to pay domestic debt, the government, through the Ministry of Finance, has
no choice but to continue to borrow from commercial banks and to attract money from
the public by issuing treasury bills.
This is the mechanism by which the government finds the possibility of
a break through which it can meet the requirement by major sources to cover the
expenses of the state budget.
The question is that, because these expenses are not covered, the government
had to do more budget adjustments.
These budget adjustments have been made only by finding new solutions
that will bring additional revenue to the state budget. On one hand, this measure may
prove once again to be more theoretical in the sense that led to stagnating sales volume
of such products; on the other hand, it is conceivable that, in an immediate sense,
some businesses with such products to slip, slowly but steadily, in the uncontrolled
market. Simultaneously, in order to attract new financial resources, especially from
the public, the government will have to sell treasury bills, a context in which, on one
hand, will increase domestic public debt, and on the other hand, will succeed however
to a settlement of population in that some currently existing financial resources will
be attracted and, thus, the ratio between supply and demand will be balanced in the
sense of decreasing demand due to lack of finances.
But the danger is that changes in excise at some products to lead, undoubtedly,
to a fan, whether or not an avalanche of price increases and other products which
includes (sometimes and that does not include) costs on account of these products.
It was more efficient that, bugets corrections not to be made solely based on
the two sources mentioned, but to be considered some concrete ways through which
the production could be stimulated, so as to achieve a profitable activity, under which
wages could be restored in a positive sense and the real taxes (income tax, payroll,
etc.) collected by the state to increase.
Otherwise, statements like We overcome top external debt payment are not
bringing satisfaction and especially, are not bringing quiet for majority of people, as
long as it asserts that several measures on social protection were found and taken.
That is why the domestic public debt that Romania currently reordered is large enough,
while the incomes of the population, for the vast mass had reached unbearable levels.
Domestic public debt, being at the budget level for nearly a year, it is hard to imagine

18 Romanian Statistical Review - Supplement nr. 4 / 2016

how the population will be able to cope with the expenditure budgets for two with
income for a single budget.
The austerity measures taken in 2011, which continued in the first five months
of 2012, and loans from IMF, World Bank and European Union will hang heavy in the
domestic financial strategy. In 2012 negative financial effects of policies from the last
three years were felt on the living standard of the population. There is an opportunity
either to find just solutions for freezing salaries or not to encourage activities that
generate new jobs and provide at least decent income for population, while at the
same time capping the unemployment rate, which will have a negative effect in
2013 for Romania (I mean the standard of living of the population, particularly the
disadvantaged). In 2014 and the first half of 2015 appeared the first signs that the
situation may recover.

Execution Of National Single Fund Health Insurance Budget

million lei
INDICATORS Achievements 1.I.- Achievements 1.I.-
31.VII.2014 31.VII.2015
A. TOTAL - INCOME 12192,9 12877,2
CURRENT INCOME 10586,7 12041,9
TAX INCOME 747,0 979,0
Other general taxes and duties on goods and services 747,0 979,0
Insurance Contributions 9834,3 11047,5
Employers Contributions 4649,1 5234,6
Policyholders Contributions 5185,3 5813,0
Non-tax income 5,4 15,4
Subsidies from state budget 1476,9 740,2
Grants from other governments 115,8 95,1
Amounts from the EU in account of payments made 13,6 -
TOTAL - EXPENSES 12984,1 12914,6
Current expenses 12996,6 12929,2
Staff expenses 90,4 88,8
Goods and services 12147,5 12011,0
Interest 3,1 0,5
Projects financed by external funds (NEF) post-accession 20,6 -
Social assistance 734,9 828,9
Capital expenses - -
Payments made in previous years and recovered in the -12,5 -14,7
current year
Finacial operations - -
C. SURPLUS (+) / DEFICIT (-) -791,2 -37,4
1) Provisional Data
Source: Ministry of Public Finance; National Institute of Statistics, Statistical Bulletin no.
7/2015.
In this paper we aim to present the execution of all budgets which together
constitute the consolidated budget. It may be noted that the deficits were reduced.

Revista Romn de Statistic - Supliment nr. 4 / 2016 19

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