Romania’s Foreign Debt Exceeds EUR 150 Billion

For the first time in its history, Romania’s foreign debt exceeds EUR 150 Billion. This is over half of the country’s GDP and almost three times its international reserves, which are EUR 52 Billion.

This is not good news for the country. In 1989, the Revolution leaders ordered to kill Ceausescu, after a mock trial. Ceausescu was the communist ruler of Romania and the only world leader who managed to pay off the country’s foreign debt.

What happened from 1989, when the neo-communist regime took a country with no foreign debt and USD 3 Billion in reserve, until now? It’s pretty simple. Corruption, which is still a pandemic in the country, mixed with terrible leadership decisions taken by an underperforming political class with a chronic lack of long-term economic vision, all made this possible: Romania, a country rich in natural resources, with intelligent people and enormous economic potential, failed to build sustainably and to offer its people the wealth they deserve.

To make matters even worse, the interest rate for Romania’s international borrowing is the highest in the European Union. While other states, like Bulgaria or the Czech Republic, pay interests of up to 4%, Romania pays up to 8%. For example, in October 2022, Bulgaria accessed loans with 1.85% interest, while Romania did the same with an interest of 9.13%.

Is the economic growth in Romania solid enough for international banks to lend money at affordable rates? It appears not. The problem, in the eyes of the specialists, is that Romania is not seen as a reliable partner by foreign investors, and they don’t trust the statistics Romania boasts of. When one of the significant components of Romania’s GDP is internal consumption, and you realize that internal demand has become crucial to the country’s growth, you are less likely to lend your money as an international investor.

This is what matters the most to foreign markets: the image the country projects outside its borders. While still able to trick its people into thinking the country’s economy is running at full speed, the Romanian Government fails to do so on the international markets. Unfortunately, these count way more in this equation, hence the skyrocketing interest rates.

In fact, the interest rate of external borrowing might be a fair indicator of the country’s economy. And Romania shows weakness from this perspective, despite statistics.