Romania's public debt has reached 54.6% of its GDP by the end of 2024 due to a significant 5.5 billion euro increase in December.
🇷🇴 Growing Debt Dilemma in Romania:
Hey there! Let's dive into the heart of the matter – Romania's burgeoning public debt. By the end of December 2024, it had ballooned to an eye-popping RON 964.3 billion (≈ EUR 193.9 billion). A whopping 22.9% year-over-year surge, believe it or not!
Now, you might be wondering what caused this fiscal freefall. Well, buckle up, because it's quite the story.
Here's the skinny: The Treasury didn't issue any foreign exchange bonds – the increase was due to a smart mix of bills and bonds sold on the local market, cash management instruments, and loans from local banks.
The public debt-to-GDP ratio shot up by a staggering 5.7 percentage points (pp) during 2024, reaching 54.6%. Over the past three years, it had hovered somewhere between 48% and 49%. Given that program of fiscal consolidation aiming to decrease the public deficit, the debt-to-GDP ratio is expected to grow at a slower pace in 2025.
The last significant uptick in Romania's public debt took place during the COVID-19 pandemic year 2020 (+11.6pp, but only EUR 25.8 billion in absolute terms). Back then, the government borrowed heavily to finance aid, while the nominal GDP took a hit.
Here's the intriguing bit: The structure of Romania's public debt has a well-balanced blend of local and foreign bonds. Interestingly, the slice of bonds held by households has increased at a healthy pace.
At the end of 2024, Romania's outstanding foreign exchange bonds (around EUR 74.8 billion) accounted for 38.6% of total debt. This amount is quite close to the volume of bonds issued on the local market in both local and foreign currency – a cool RON 372 billion or EUR 74.9 billion.
домашние облигации в портфолио местных домохозяйств составляют 5.1% от общей долга государства, в то время как в конец 2023 года это было 4.4%.
Кредиты составляют 15.9% от общей суммы долга, в то время как в конец 2023 года это было 18.5%.
Объём кредитов вырос гораздо медленнее, чем объём выпускаемых государством биллов и облигаций на внутреннем рынке за 2024 год. Соответственно, объём иностранных кредитов вырос на 15.1 миллиардов евро (+25% годового роста) за 2024 год и составил 21.1% от ВВП, а на конец 2023 года это был 18,5%.
На внутреннем рынке, рост объёма выпускаемых государством биллов и облигаций вырос на схожий объём, stripped down for your convenience: EUR 16.3 billion. A notable EUR 2.7 billion increase here came from households.
In the end, losing control over its debt has landed Romania in a precarious situation. But, the government has taken steps toward consolidating its finances, including freezing wages and pensions for public sector employees and implementing additional revenue measures to reduce the deficit going forward.
Sources:
[1] Ministry of Public Finance - Romania: (https://mof.gov.ro/)
[2] European Commission: (https://ec.europa.eu/)
[3] National Bank of Romania: (https://www.bnr.ro/)
[4] World Bank: (https://www.worldbank.org/)
[5] Romania Insider: (https://romania-insider.com/)
In light of the growing public debt in Romania, the government has been actively participating in the finance industry by issuing bills, bonds, and taking loans from local banks as part of their cash management strategies. The structure of Romania's public debt also includes a significant proportion of bonds held by households, showing a rising trend in domestic finance.
