Romania's gross financing need rises this year, despite fiscal consolidation

In 2022, the gross financing need of the Romanian Government, respectively the total volume of funds to be raised by the Ministry of Finance from the internal and foreign markets, is about RON 145.4 bln (EUR 29 bln, 11% of GDP), about RON 10 bln (EUR 2 bln) more than last year, according to the ministry's "Indicative program for issuing government bonds for 2022."

This is despite the public cash deficit planned at 5.84% of GDP this year, down from 7.1% of GDP in 2021.

To secure the necessary resources, the ministry plans to borrow around EUR 14 bln from international markets, including by the issuance of Eurobonds in a volume of around EUR 10 bln,depending on the developments, conditions and opportunities offered by these markets, according to Cursdeguvernare.ro. The Government also expects the disbursement of around EUR 3.7 bln by the EC under the Recovery and Resilience Facility.

The increase (by 7.7% compared to 2021) of the financing needs occurs in the context of rising interest rates, given that Romania borrows at costs well above the regional average.

This is the highest rate since March 2020 (when it reached 4.89%) - a record in the year the pandemic broke out after falling to just 2.65% in February 2021.

In the first 11 months of 2021, the public debt interest rose by 18.8% YoY to RON 16.6 bln.

Under the fiscal-budgetary strategy for the period 2021-2024, it appears that the interest will increase by 26.2% YoY to RON 18.3 bln (EUR 3.6 bln) lei 2022.

According to the latest Eurostat data, Romania's long-term interest rate rose again in November 2021 to 5.11%.

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