The unitary system of budgets was an important moment in the evolution of public finances, creating the framework for more effective management and control over allocated funds, public finances becoming those interactive tools used to match the requirements of economic and social environment, also being a catalyst for development. Romanian economy hasn’t matured yet, we are to achieve satisfactory participation in Gross Domestic Product (GDP) which, concerning the budget, should be translated into a higher need for contribution, or should be seen, as well, as a factor of progress and a step towards European integration. We appreciate the important role of the International Monetary Fund (IMF) Agreement that requires specific behavior in implementing the budget and monitoring the Executive to fulfill the commitments. Also, the EU proposal to consider the national budgets of the governments of other countries in order to monitor the budget deficits would be for this stage also necessary and beneficial.We are now experiencing the reconsidering of the budget process and budget system at European level with the required EU enlargement, which aims to rethinking the perception role that public finances must play inside contemporary society.budget, public finance, legality of public funds

Gherghina DRILA

English

Research Papers in Economics

Scientific Bulletin – Economic Sciences, Vol. 9 (15) 
- Accounting, Statistics and Financial Analysis - 
 
  71 
BUDGET AND BUDGETARY PROCESS IN ROMANIA 
Assistant Professor Ph.D. Gherghina DRILA 
University of Pitesti, Faculty of Economic Sciences 
gherghina.drila@upit.ro 
Abstract: The unitary system of budgets was an important moment in the evolution of 
public finances, creating the framework for more effective management and control 
over allocated funds, public finances becoming those interactive tools used to match the 
requirements  of  economic  and  social  environment,  also  being  a  catalyst  for 
development. Romanian economy hasn’t matured yet, we are to achieve satisfactory 
participation in Gross Domestic Product (GDP) which, concerning the budget, should 
be translated into a higher need for contribution, or should be seen, as well, as a factor 
of progress and a step towards European integration. 
We appreciate the important role of the International Monetary Fund (IMF) Agreement 
that  requires  specific  behavior  in  implementing  the  budget  and  monitoring  the 
Executive to fulfill the commitments. Also, the EU proposal to consider the national 
budgets of the governments of other countries in order to monitor the budget deficits 
would be for this stage also necessary and beneficial .We are now experiencing the 
reconsidering  of  the  budget  process  and  budget  system  at  European  level  with  the 
required  EU  enlargement,  which  aims  to  rethinking  the  perception  role  that  public 
finances must play inside contemporary society.   
Keywords: budget, public finance, legality of public funds 
Jel Classification: H61, E60 
1. INTRODUCTION 
Literature  defines  the  budget  process  as  "all  actions  and  measures  undertaken  by  the 
competent state institutions for realizing financial policy applied by the government”
1. These 
activities are for the state as the main force of development by exercising their functions between 
the levers and instruments occupying an important place in the legislative and public budget.  
The legislative framework governs the conduct of state entities in society and the budget 
helps  resources  to  be  mobilized  in  public  expenses.  Both  the  legislative  and  budget  were 
constantly imposed by dynamic internal and external factors and by the changes taking place in 
society. As the main instrument of the state, budget has changed in line with public finances; 
without the changes, though, there would have been imbalances inside the society itself.  
Concerning  the  public  finances  after  the  1990,  changes  were  imminent  due  to  the  new 
conditions appeared inside the Romanian society, being carried out both at the conceptual level 
and  functions  of  public  finance  and  starting  in  1991;  the  transformations  continued,  being 
regulated in 1996 and 2002 by endorsing the Law of Public Finances, without considering the 
process to be complete.  
Law no. 10 of 1991 established a direct link between public finance and state budget, a law 
that was to provide expertise in developing and executing the budget, setting the collection of the 
                                                 
1 Vacarel, I.and colective, Public finance, Didactic and Pedagogic Publishing House, Bucharest, 1999, p. 607. 
 Gherghina DRILA 
  72 
state revenues, the use of public funds and control of their management. These changes defined 
the early beginning of the budget democracy in Romania.  
At one point the changes became so inadequate, blocking progress towards a world that was 
fully experiencing the process of globalization so that they have imposed new changes which 
were established by a new public finance law, Law no. 72/1996. This law has refined the means 
of managing public funds, has improved tracking and control system of fund management, which 
has led to a unified system consisting of budgets: state budget, state social insurance budget, 
local  budgets,  special  funds  budget,  state  treasury  budget,  budgets  of  autonomous  public 
institutions.  
2. THE CONCEPT OF BUDGET IN RELATION WITH PUBLIC FINANCE 
The unitary system of budgets was an important moment in the evolution of public finances, 
creating the framework for more effective management and control over allocated funds, public 
finances becoming those interactive tools used to match the requirements of economic and social 
environment, also being a catalyst for development.  
Romanian economy hasn’t matured yet, we are to achieve satisfactory participation in Gross 
Domestic Product, (GDP) which, concerning the budget, should be translated into a higher need 
for contribution, or should be seen, as well, as a factor of progress and a step towards european 
integration.  
An important part of public finance reform was the development of the Law 500/2002, 
which established significant changes, being at that time a step towards our country's accession 
to the European Union. This law approved issues deepening democratization of public finances 
through the introduction of modern tools that track and control: the general consolidated budget.  
This tool has created a legal framework for eliminating highlighting of the revenue repeatedly 
being transferred towards authorized officers, thus using the aggregation procedure for all public 
funds that compose the budget system. 
Another  important  provision  of  this  Act  is  to  redefine  the  respective  responsibilities  of 
public institutions and independence of action under the law.  
Provisions  on  the  budget  and  budget  process,  contained  in  the  Public  Finance  Law  no. 
500/2002 represent a step towards liberalization and democratization of public finances, which 
also are a requirement of the need for progress.  
Analyzing the concept of budget in relation with public finance, as a tool used for showing 
the  ability  to  mobilize  state  resources  and  public  expenses,  we  take  notice  of  a  threefold 
approach regarding this concept in the literature: legal, economic and financial.  
a. The legal approach of the budget is built on the following features:  
-  Approval  is  made  through  the  law,  by  the  Parliament  which  gives  it  a  compulsory 
character during the period of approval;  
-  It is an official document, in which income and expenses are included in the approved 
annual budget law. So, the income and expenses are authorized for a period of one year. 
b. Economic approach is the linkage between budget and the evolution of GDP, the latter 
determining the level of revenue and expenditure included in the budget, requiring compliance 
with  macroeconomic  correlations  between  GDP  and  budget.  At  the  same  time,  the  budget 
expresses economic relations that begin once with the distribution of GDP in order to fulfill state 
functions. 
c.  Financial  approach  is  explained  by  that  function  of  an  economic  and  financial 
instrument, by indicators showing the financial balance of public finances, separating income 
and expenses, under the Ministry of Public Finance’s (MPF) mandatory regulations. The reality 
involved in the three budget approaches raises a number of comments from theorists / academics 
about  the  order  of  importance  and  yet  the  three  approaches  explain  their  apparent 
complementarity, excluding the possibility of any individual treatment or hierarchy. Scientific Bulletin – Economic Sciences, Vol. 9 (15) 
- Accounting, Statistics and Financial Analysis - 
 
  73 
In addition to its role as document that records the dispositions and financial accounting, 
budget  is  particularly  important  for  maintaining  financial  stability,  when  it  comes  to 
macroeconomic monetary and foreign currency balance, by using funds in those strategic areas 
of the economy, thereby facilitating economic growth and recovery from stress/ crisis conditions.  
Integration into the EU and especially the recent crisis in our country require a different 
philosophy from the authorities dealing with the budget process and the national budget system. 
Current trends manifested in the world are particularly oriented to give greater attention to the 
state  office,  as  the  administrator  of  public  funds,  with  attention  focused  on  supporting 
investments. At this stage Poland, Hungary, the Czech Republic have managed to overcome a 
state of crisis by using bold investment policy.  
Crisis history has shown that without efforts focused on significant investments to generate 
capital gains and rapid retraining, the crisis moments are likely to worsen. For example, Japan 
emerged from the crisis in the years 1929-1933 through major investments, although at that time 
had a weak economy.  
To track the progress made on the public finances in the budget process we use data for 
2008 and 2009 budget which represent two periods of interest for analysis. The objective of our 
analysis is to study the degree of revenue collection approved by the annual budget law, the 
degree to incur expenditure, differences in the performance index of the two indicators, analysis 
of revenue and expenditure structure.  
After the implementation of macroeconomic indicators presented in the consolidated budget 
during 2008 and 2009, that are found both in the preparation phase and implementation phase, 
there was no taking into account of the principle of determining realistic budget revenues, the 
consequences being translated into the increase in public debt, that was to cover the registered 
budget deficit. Inside the structure there is a reduction of capital expenditure in 2009 compared 
to  2008,  up  to  13.3%, which  is  not  favorable  for  economic  recovery.  Tax  revenues,  wages, 
income and capital gains were reduced by 3.4%.                  
The financial amounts Romania received from the EU were of great help, speaking in terms of 
financial  contribution  for  2009;  those  amounts  have,  in  a  certain  way,  raised  the  level  of 
economic and social activity. Expenditure on social assistance have reached alarming levels in 
2009 - 12.7% of  the GDP, the growth being registred only up to 18.10%,  compared to 2008.             
Indicators  achieved  in  2009  led  the  Executive,  the  main  factor  in  achieving  the  budget 
process, to review economic and financial policy for 2010, so that the budget be prepared as a 
combination of economic doctrine and concepts of every field’s specialists.  
We appreciate the important role of the International Monetary Fund (IMF) Agreement that 
requires specific behavior in implementing the budget and monitoring the Executive to fulfill the 
commitments. Also, the EU proposal to consider the national budgets of the governments of 
other countries in order to monitor the budget deficits, would be for this stage also necessary and 
beneficial. We are now experiencing the reconsidering of the budget process and budget system 
at European level with the required EU enlargement, which aims to rethinking the perception 
role that public finances must play inside contemporary society.   
 Changes occurred mainly in the legislative field, but also regarding the changing attitude in 
using the public funds and their management. In our country, once with the third stage of the 
reform of public finances made by Law 500/2002, the state has reformed until now less visible 
aspects  of  the  budget  process  such  as:  commitment,  validation,  authorization  of  public 
expenditure, which led to the separation of the authorized officer’s duties from the attributions of 
the ones responsable for paying and increasing accountability of decision makers of society.  
The link between public finances and the budget was one of interdependence. Along the 
history of finance area, budget and budget process were defined by the role they had in society 
and by the degree of complexity of state tasks at that particular stage. Since establishing the 
functions of mobilization, allocation and utilization of money key resources, budget has been an Gherghina DRILA 
  74 
economic category occurred at a certain stage of development of human society, whose role has 
been demonstrated within time.  
Such a document was drawn up for the first time in England in 1215 and  it expressed the 
figure  forecast,  at  the  time,  of  structure  elements  representing  a  program  or  established  and 
defined tasks in time and space. After absolutist monarchies used for a long time budgets of the 
states,  this  right  of  theirs  was  restricted  by  the  introduction  of  control  and  revenue  and 
expenditure  records,  expressing  today's  complex  relationships  and  contemporary  democratic 
economic policy. 
CONCLUSIONS 
Today’s budget concept defines all money relations that are put into practice by public 
finance in every country, as an act of will in which issues like source of income and destinated 
expenses assessed in a realistic amount, for the public needs and intangible economic sphere of 
society, are well established and considered as needs to be determined and legally authorized by 
decision makers. Budget evaluates financial targets, projects and programs that will achieve the 
financial year.  
To summarize, the above budget can be defined as:  
￿ systematic prediction of priority objectives inside both economic and social areas; 
￿ financial plan that describes in specific terms the means and sources to achieve agreed 
objectives;  
￿ balance between uses and resources that can be mobilized by the state in a given period 
based on a general framework which lays down rules, principles, procedures; 
￿ plan estimating, forecasting and managing income and expenses for achieving legal 
objectives under government authority, through the institution’s will and responsibility.  
The main objective of the budget process is thus the budget for the realization of which the 
following steps are to be taken: 
              1. drafting a budget; 
              2. budget approval; 
              3. budget execution; 
              4. conclusion of budget execution; 
              5. control of budget execution; 
              6. approval of budget execution. 
Each stage has its role in building a realistic budget to meet the economic doctrine of the 
government and budgetary principles that are the foundation of reality, legality and effectiveness 
of using public funds. 
The  crisis  has  yet  imposed  its  beneficial  economic  cooperation  between  doctrine  and 
technocracy. 
 
REFERENCES: 
1.  Văcărel, I.  and collective, Public finance, Didactic and Pedagogic Publishing House,  Bucharest, 
1999, p. 607. 
2.  Public Finance  Law no. 500 / 2002. 
3.  Local Public Finance Law no. 273/ 2006. 
4.  Dobrota, N.co-ordinating, Dictionary of Economics, Economic Publishing House, Bucharest, 1999. 
5.  Belean  P.,  Public  Budget  and  Treasury  published  in  Romania,  Economic  Publishing  House, 
Bucharest, 2007. 
6.  www.ocde.org 
7.  www.mfinante.ro 
 

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