Romania Borrows Record-Breaking Amounts to Pay Debts

The Romanian Government borrowed EUR 7.7 billion from the foreign market in January. This is a new monthly record.

Compared to the loans from 2020, which reached the amount of EUR 33 billion, when the financing need was around EUR 30 billion, the amount of the loans from 2021 was below the financing need, at EUR 21 billion. However, the 2022 forecast does not look good.

The end of January sets yet another new premiere. The last loan made by the Romanian Government records two external outflows in a single month. Also, former Prime Minister Florin Citu talks about an emergency loan from the external markets.

There is one more thing, of vital importance. The confidence of the investors in Romania’s Government. Without their confidence, in the current global context, Romania could be forced to ask for an emergency loan from international institutions.

Florin Citu, former Prime Minister and current Natioal Liberal Party leader

The long-term effects of these loans must be considered

It is not new that Romania owes itself to the foreign market with each passing year, but the effects of these loans must be considered. It should be noted that the Romanian state borrows money to cover the budget deficit, the difference between higher expenditures and lower revenues, and the rolling of the maturing debt. This year, the debts incurred in 2012 reach maturity. Therefore, the Romanian Government must face the first significant payment peak on older obligations with over EUR 2 billion.

The first significant payment on public debt is due in 2022, at the beginning of February. According to the data analyzed by Profit, the amount of the first payment amounts to USD 2.02 billion, more precisely 8.83 billion lei, the equivalent of the amount borrowed by the Romanian state in 2012 from the foreign market, to which is added another EUR 200 million to be paid on the domestic market.

Holes in Romania’s economy

Last but not least, with this debt knocking at the door, the problem of foreign investors in Romania is accentuated. Foreign investors lose confidence in the Romanian economy due to the constant loans of the Romanian state. In this case, the Romanians working abroad have become the biggest foreign investor in Romania, which constitutes a concerning factor for the country’s economy shortly.

Romania’s situation will not change unless solutions are taken and strategies are established to support the country’s economy. This change provides for less gratifying measures for the Romanian worker.