Against the wishes of the IMF, Romania’s government has approved a draft law cutting the social security tax paid by the employers by 5 per cent.

The bill, designed to boost jobs and business, needs the approval of parliament before becoming effective in October, but the centre-left ruling coalition has a majority in parliament to ensure it goes ahead.

Romanian companies currently pay the government just over 20 per cent of the gross salary of their employees to fund the social security system.

The cut to the tax, known as the CAS, would place Romania second in Eastern Europe in terms of the lowest social security costs, after Slovakia, according to a survey conducted by Accace advisory company.

The move is controversial, however, as Romania’s main lender, the IMF, does not favour cuts to the CAS, fearing the impact on government revenues.

The IMF has meanwhile postponed its review of Romania’s precautionary agreement to the autumn, seeking details about the 2015 budget.

A mission from the Fund has been in Bucharest to conduct the third review of Romania’s precautionary stand-by arrangement.

Romanian officials have tried to persuade the IMF to approve a set a measures aimed at creating more jobs and increasing incomes, including the cut in the CAS and a reduction of VAT on meat, fruit and vegetables.

Romania concluded its last deal with the IMF and the European Union worth 4 billion euro last July.

The standby arrangement is for 24 months, and includes 2 billion euro from IMF and another 2 billion from Brussels. The government does not intend to draw on the money.

This is the third agreement that Romania has requested from the IMF since 2008, when the economic crisis kicked in.

Despite the availability of money from international lenders, reforms in Romania have not progressed as quickly as envisaged.

The country is running late with planned privatisations and with the restructuring of several state-run companies.