Government Borrowings in the First Six Months of the Year
In the first six months of this year, the government borrowed 131 billion lei, with 11.6 billion lei of this sum being borrowed in June alone. This makes June the month with the lowest amount of borrowings this year, according to calculations by Profit.ro. With the 131 billion lei borrowed, the state has reached 72% of the borrowing requirement announced for the year 2024, which is 181 billion lei.
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Rapid Pace of Borrowings
The pace of borrowings this year is quite brisk. For example, last year, the government only exceeded the 131 billion lei threshold in September, when it borrowed 29.4 billion lei, reaching a total of 143.4 billion lei by the end of the month. A series of borrowings, such as two bond issuances totaling around 3.2 billion lei, for which auctions were held in June,
Government Borrowing Reaches Record Highs
In June, the state borrowed 2.17 billion lei through the Fidelis program, with a repayment deadline set for July 1st. This amount will be included in the government’s borrowing for the month of July. July is shaping up to be a month with significant borrowing.
At the end of May, the government’s borrowing for 2024 stood at 119.39 billion lei. According to calculations by Profit.ro, the Ministry of Finance borrowed 32.4 billion lei in January, 31.82 billion lei in February, 13.53 billion lei in March, 12.93 billion lei in April, 28.7 billion lei in May, and 11.6 billion lei in June.
The pace of borrowing is unprecedented, but it is important to note that the borrowing needs for the entire year are high. Finance officials are working to meet these demands while ensuring financial stability.
Financing Challenges Ahead of Elections
The Ministry of Finance is facing significant challenges in securing funding ahead of the upcoming parliamentary and presidential elections at the end of the year. Financial markets are expected to become more cautious as they await the election results.
Responsibility for securing loans for the government falls on the Ministry of Finance, which must pay 94.4 billion lei this year towards old debts that are due, as well as provide funds to cover the budget deficit, estimated at 5% of GDP, or 87 billion lei. In 2024, the Ministry of Finance has announced that the gross financing requirement (deficit + debt rollover) will be 181 billion lei.
Exceeding the budget deficit target of 87 billion lei (5% of GDP) in 2024 would automatically result in a larger loan requirement of over 181 billion lei. The government regularly borrows from banks and other major investors in the domestic market, as well as from the population through programs like Tezaur.
Government Funding Needs for 2024
In 2024, the government’s gross funding needs are estimated to be around 181 billion lei, excluding cash management instruments. The amount of loans to be attracted by the Ministry of Finance from domestic and international markets is expected to be at a similar level to the gross funding needs, around 181 billion lei, which is 10.8% less than the volumes attracted in 2023 (203 billion lei). This decrease is determined by the projected level of the budget deficit, which is 5% of GDP.
Funding is secured through various sources such as international institutions like the World Bank or EBRD, occasionally through the PNRR when the European Commission approves payment requests, and several times a year through eurobond issuances on the external market, with amounts in the billions of euros or dollars.
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Government Debt in Romania Reaches Record Levels
In 2023, the Romanian government was faced with a daunting task of refinancing its debt, which had reached an all-time high of 203 billion lei. This was a result of repeated adjustments to the financing needs, driven by a higher than expected budget deficit.
Initially, the gross financing needs for 2023 were estimated at 160 billion lei. However, as it became evident that the budget deficit would exceed the initial target of 4.4%, this figure was revised upwards to 180 billion lei, and eventually to 200 billion lei. By mid-December, the borrowing requirement was revised for the third time in 2023, and stood at 205 billion lei. Actual borrowing amounted to 203 billion lei.
Looking ahead to 2024, the government faces the challenge of refinancing a debt of 94.4 billion lei. With total outstanding debt exceeding 300 billion lei, careful financial management will be crucial in ensuring fiscal sustainability in the years to come.
