Romania, more and more indebted. Where to?

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On Thursday, the National Statistics Institute (INS) revised the figures regarding the economic growth in 2017, down from 7% to 6.9%. No matter from the viewpoint you look to it, the economic growth is huge. As the ruling coalition says, the highest in the world.

No surprise thus that the messages coming from the ruling coalition, made up by PSD and ALDE are related to this development, with stress also on the wage increases in the past year and a half, and that the situation is under control. PM Viorica Dancila criticized earlier this week, in her speech in Parliament, the voices coming from opposition, which anticipated an economic crisis or collapse, due to the development based on consumption.

In a recent comment, points to the fact that, although the economic growth was impressive in 2017, Romania has borrowed money, huge amounts, as much as it borrowed from the IMF in 2009, i.e. EUR 11.83 billion. And the loans are ongoing, with higher interest rates.

Hence, let’s look at the amounts borrowed by Romania last year:

  • In three and a half months last year, Romania borrowed EUR 4.7 billion;
  • April 2017 – RON 4.390 billion + EUR 1.75 billion;
  • May 2017 – RON 4.192 billion;
  • June 2017 – RON 5,929 billion + EUR 100 million;
  • July 2017 – RON 5.565 billion;
  • August 2017 –RON 3.632 billion;
  • September 2017 – RON 3.679 billion;
  • November 2017 – RON 1.160 billion + EUR 1 billion;
  • December 2017 – RON 1.349 billion.

Overall, in 2017 Romania borrowed the equivalent of EUR 11.83 billion, about the same amount as the loan from the IMF in 2009 in seven tranches, during the economic crisis (the loan from the IMF was of EUR 12.9 billion, of which Romania has taken over about EUR 11.9 billion).

The trend continues in 2018:

  • January 2018 – RON 3.419 billion;
  • February 2018 – RON 2.778 billion + EUR 2 billion;
  • March 2018 – RON 3.752 billion.

Total amount in Q1: the equivalent of EUR 4.139 billion.

The loans have various terms, from one year to 18 years, so the debts could be covered at least in 2035, also informs.

The source point to the National Bank of Romania (BNR) statistics regarding the costs of the loans:

– the yield on one-year treasury bills has increased from 0.98% (in January 2017) to 2.38% (March 2018);

– the yield for 2-year RON bonds rose from 1.38% (January 2017) to 3.19% (March 2018);

– the yield for 3-year RON bonds rose from 2.05% (January 2017) to 3.88% (March 2018).

The government’s plan is to borrow even more money in 2018 than last year: about RON 50 billion from the domestic market (against nearly RON 40 billion in 2017) and another EUR 4.5-5 billion from the foreign markets (EUR 3 billion in 2017).

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