Romania’s public debt nears 40% of GDP at end-May

Romania's public debt increased by RON 23.2 billion (EUR 4.8 bln) in May, amid the EUR 3.3 bln Eurobonds issue, to reach RON 428.4 bln (EUR 88.5 bln) at the end of the month.

The debt-to-GDP ratio reached 39.9%, over 2pp more than a month earlier. In addition to the Eurobonds, the Treasury also raised RON 1.5 bln (EUR 300 mln) in the month.

Since the end of 2019, Romania's public debt rose by RON 55 bln (EUR 11.3 bln), and the debt-to-GDP ratio advanced by 4.7pp.

The USD 3.3 bln Eurobonds in July and the financing needs for the rest of the year amid subdued economic activity are expected to push the debt above 45% of GDP.

This situation will trigger corrective measures and drafting relevant strategies. The lack of corrective actions will complicate the financing of the deficit: seen by the Government at 6.7% of GDP. The Government added no active fiscal consolidation measure to the passive measure of curtailing and deferring the pension hikes.

"We are already borrowing not only more expensive than in previous months but also at costs well above the level other countries in the region pay. We have the highest country risk in the entire European Union, and this is the reality we have to face," commented independent analyst Laurian Lungu for Ziarul Financiar.

He also pointed out that there is no correction on the public spending side, which will result in higher yields charged by lenders.

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