July 28, 2020 / 6:16 AM / 17 days ago

Romanian government to hike child benefits by a smaller percentage

FILE PHOTO: Romania's Minister of Finance Florin Citu attends a government meeting in Bucharest, Romania, December 13, 2019. Inquam Photos/Octav Ganea via REUTERS

BUCHAREST (Reuters) - Romania’s centrist minority government will raise child benefits in smaller increments from August, Finance Minister Florin Citu said, one of several social spending hikes out of parliament that are pressuring a rising budget deficit.

The former ruling Social Democrats, parliament’s biggest party, spearheaded a bill that doubles state subsidies for schoolchildren, piling pressure on a cabinet already grappling with the economic fallout from the novel coronavirus epidemic.

“It is a bill without a funding source,” Citu told private television station Realitatea Plus late on Monday.

“The prime minister will announce (by how much child benefits will rise). It is around 15%, but we will not stop here, we will have another hike in January.”

Citu said the smaller hike could be approved through a government decree later this week.

Even before the pandemic, Romania was struggling with a rising budget deficit, and a 40% pension hike effective Sept. 1, also approved last year by the previous government, has prompted warnings of credit rating downgrades.

The government also plans to raise pensions by a smaller percentage through a decree in mid-August.

The government has estimated the budget deficit will jump to 6.7% of gross domestic product this year while the economy will contract by 1.9%. All three major credit agencies have Romania on their lowest investment grade with negative outlooks.

Reporting by Luiza Ilie; Editing by Kim Coghill

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