Romania's public debt exceeds 50% of GDP after 2.8pp leap in Jan-Feb

Romania's public debt rose by RON 11.6 bln (EUR 2.3 bln) in the second month of 2023, resulting in a massive RON 40 bln (EUR 8.1 bln) YTD advance during the first two months of the year, the Finance Ministry announced.

The heavy borrowing, including several Eurobonds, added 2.8% to the debt-to-GDP ratio that marginally exceeded the 50% threshold.

In absolute terms, the country's public debt reached RON 706.5 bln (EUR 143.6 bln).

The public debt increased both in January and February entirely on account of the external debt, which thus reached 52.6% of the total at the end of February from 49.6% at the end of 2022.

The debt-to-GDP ratio will probably fall back under the 50% threshold after the Q1 GDP data is released and the denominator of the ratio increases. Furthermore, frontloading on the foreign markets puts Romania in the comfortable position of having to choose on the size of further issues in the second half of the year.

The country took advantage of the unexpected change in investors' sentiment with bumper debt issuance, selling EUR 2 bln of 2026 and 2029 Eurobonds on January 30 after a USD 4 bln triple bond issue at the start of January.

The issue Romania may launch in H2 might be EUR 1 bln instead of EUR 2.5 bln or more (as needed for completing the full-year target), and it would most likely be green or sustainable, said the head of the finance ministry treasury Stefan Nanu after the latest Eurobonds, while not ruling out further issues or private placement deals.

In the meantime, the demand on the local market remains robust, with the bid-to-cover ratio at nearly 1.6x in April and nearly 1.9x in May.

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