Romania’s public debt rose by RON8.9bn (€1.8 bln) during April to RON602.9bn, according to data published by the Ministry of Finance, even though the country did not issue any Eurobonds during the month.
The debt to GDP ratio rose to 49.2% from 48.4% at the end of March. The ratio was 48.8% at the end of 2021. However, it is not the size of the public debt that raises concerns, but the cost of the public borrowing — which increased by 0.9pp to 8.74% in June.
In April, the Treasury issued €260mn of bonds on the local market (in addition to the local currency bonds) and the government began absorbing money from the almost €4bn disbursed by the European Commission under the Resilience Facility but placed initially in the accounts of the National Bank of Romania therefore not included in the public debt.
Romania’s medium and long-term debt increased, in April, by RON9.4bn to RON583.0bn while the short-term debt decreased by some RON0.5bn to RON19.9bn. Most of this debt, RON498.6bn at the end of April, consists of government securities. The loans amounted to RON94.5bn.
By currency, Romania’s public debt is denominated in euros (the equivalent of RON288.9bn) and in local currency (RON265.0bn) while the share of dollar-denominated debt is smaller (the equivalent of RON47.6bn).
The average interest paid by Romania for the money borrowed in June rose to 8.74%, up 0.9pp compared to May and the highest level in the European Union by far, according to a survey carried out by CursDeGuvernare.ro.
The wide public budget deficit (the country is under excessive deficit procedure) and the wide current account gap (above 7% of GDP), as well as the problematic sovereign rating (the lowest in the investment grade area), are the main reasons.
Romania’s long-term borrowing costs, an indicator of the confidence that investors have in the direction of the economy, have more than doubled in the last year, being only 3.24% at the level of the month July 2021, according to Eurostat data.