Romania plans more Eurobonds this year, Samurai issues considered

Romania needs to borrow RON 160 bln (EUR 32 bln, over 10% of GDP) from the domestic and foreign markets to finance the budget deficit and refinance previous debts, considering the projected budget deficit level of 4.4% of GDP (some RON 68 bln) and the volume of the principal due on the outstanding public debt (nearly RON 92 bln), according to the debt issue plan published by the Finance Ministry.

The principal to be returned this year accounts for 5.9% of the estimated GDP – only marginally more compared to 5.8% in 2022 but significantly higher by historical standards.

The Finance Ministry estimates that the budget deficit will be financed to a large extent from foreign (70%) in contrast to the 50:50 split typically used. But the external public debt to be repaid this year (EUR 2.5 bln) is significantly lower than it was in 2022 (EUR 3.1 bln) and certainly smaller compared to the EUR 4.7 bln to be returned in 2024, thus leaving room for foreign borrowing to be used to a larger extent for deficit financing.

Furthermore, foreign borrowing will probably increase this year in contrast to Government’s plans sketched last year.

In September, treasury head Stefan Nanu hinted that the volume of Eurobonds would be lower in 2023 as it turns to EU grants and loans under the Resilience Facility (RRF), and a smaller budget deficit will reduce the net financing needs. However, it turns out the country may actually borrow more from foreign markets this year after raising only EUR 8 bln.

The Romanian Ministry of Finance explores ways to diversify the foreign currency structure of the public debt, and for this, it is evaluating the option of selling bonds denominated in Chinese Yuans (Panda bonds, denominated in CNY ) or Japanese Yens (Samurai bonds, denominated in JPY) Profit.ro announced in December quoting officials of the ministry involved in the process.

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