Romania's economy will register a 2% drop in 2010 and inflation will reach 7-8% by the end of this year due to the VAT increase, Romanian authorities wrote in the intent letter to the IMF, released on Thursday by the IMF and quoted by the Romanian news agency Agerpres.

In 2011, the economy will grow y 1.5 - 2%. Some of the causes of the economic growth delay are the drop of internal demand, the unfavorable regional situation and this spring's floods. "We plan to pay the state's debts to the health sector, worth 1.09 billion lei", the intent letter reads.

The government commits to reduce the budgetary personnel by 74,000 employees, despite the 27,000 already laid off. Salaries in the public sector will register a low increase if another 15,000 people will be laid off by the end o the year.

Moreover, pensions will be frozen and heating subsidies will be eliminated. As of 2011, local administrations will pay debts to private companies themselves. The government commits to improve the absorption of EU funds, by improving the access to co-finances, improving the IT program for auctions and the capacity of management units to deal with the projects.