Romania attempts to reduce Eurobond issuances in 2023

Romania will reduce its foreign market borrowing target for next year as it turns to EU grants and loans under the Resilience Facility (RRF), and a smaller budget deficit will reduce the net financing needs, Treasury head Stefan Nanu commented for Reuters.

Romania has sold about EUR 8 bln of a foreign debt target of EUR 10 bln this year. Nanu admits he is not ruling out another issue pending market conditions, although the forex buffer is large enough.

"During this period, an issuer has much shorter windows of opportunity, which requires flexibility," said the director general of the State Treasury, Stefan Nanu.

"The Eurobond target is variable, depending on the materialization of opportunities on other financing instruments. The idea is to reduce supply a bit to reduce the pressure on credit spreads, which are inflated by high supply, unwarranted by the outlook for credit risk fundamentals," he added.

In the recent update on the country's rating, however, theFitch agency warned that "Romania's challenges are around financing given global risk aversion and the large financing needs."

Although the financing needs are set to moderate somewhat in 2023-24 (from close to 11% of GDP in 2022), it will still require extensive external issuances (of around EUR 8 bln - EUR 10 bln) and relying on a heavily tapped domestic market under the scenario sketched by the rating agency. Loans from the Recovery and Resilience Facility (RRF) and other multilateral support will help reduce some pressures, but this will be towards the end of the forecast period [2023-2024), the Fitch agency estimates.

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