U.S. government representatives have informed the Romanian side about the possibility of accessing funds under advantageous conditions through the Foreign Military Financing (FMF) mechanism to finance military procurement contracts with U.S. Department of Defense agencies, according to the Ministry of Finance, which has prepared a draft emergency ordinance to this effect.
According to the source, the FMF mechanism provides up to $4 billion in available funds for direct loans, with a repayment period of 12 years and a one-year grace period after the first disbursement, at interest rates close to the U.S. government’s financing costs, specifically the interest rates on U.S. Treasury bonds plus a margin.
Additionally, the mechanism approves up to $8 billion in funds raised through loans from financial markets, guaranteed by the U.S. government.
The availability of these funds changes as loan agreements are signed with partners. Poland has been the only country to benefit from this program so far.
“The FMF funding mechanism offered by the US Government is thus an effective and advantageous way of diversifying the funding sources of the Romanian state, from the perspective of maturity and the costs associated with this funding compared to other funding sources used by the Romanian Government, simultaneously with the development of strategic military capabilities”, states the Ministry of Finance.
The Romanian ministry mentions that in addition to the contracts for the purchase of military equipment and techniques of the Ministry of Defense, other contracts carried out by state companies have been identified, which are part of the country’s National Defense Strategy and which, according to discussions held with US partners, could be eligible for funding under this mechanism.
In order to be able to use the direct loan facility offered by the US Government under this mechanism in 2024, the loan agreement between the US Government and the Romanian Government must be signed by September 30, 2024.