An assessment of Romanian fiscal policy cannot ignore the massive shift of the previous quasi-fiscal expenditures onto the budget in 1997. The switch to a market-based management of reserve money accompanied the suspension of selective credits from the National Bank, in particular to agriculture. An explicit budgetary subsidy to agriculture replaced the directed financing by the National Bank at concessionary interest rates. The liberalization of the market for treasury bills entailed a surge of budgetary interest payments. Explicit subsidies to energy-intensive state enterprises facilitated the liberalization of the foreign exchange market. All of these changes seem to have cost the budget about 4% of gross domestic product in 1997. Budget expenditures remained stuck at the level of the previous year to accommodate the suspension of the previous quasi-fiscal subsidies. The significant fiscal contraction in 1997 is only marginally reflected by the otherwise slight shrinkage of the recorded budget deficit to 3.5% of gross domestic product–only 0.4 percentage points lower than in 1996. Further reduction of the budget deficit proved extremely difficult, so that in 1998 it remained at about the same level as in 1997.