Romania’s Debt Managers Increase 2024 Funding Target to $48.3 Billion, Reports Reuters

BUCHAREST (Reuters) – Romania has increased its 2024 funding plan by approximately 20% to 217 billion lei ($48.3 billion), as announced by debt managers on Monday. This adjustment aims to accommodate a larger budget deficit and to pre-finance needs for 2025 amidst a busy election calendar.

The country, which is the second poorest member of the European Union, initially set a funding target of 181 billion lei, based on a deficit goal of 5% of its economic output. So far, debt managers have managed to secure 91% of this initial plan.

However, escalating spending has rendered the deficit target less attainable, leading ratings agencies and analysts to anticipate tax increases starting in 2025.

To mitigate currency exchange risks and enhance the domestic market’s capacity to handle bond volumes, the debt agency stated that the additional net funding for 2024 would be sourced from both domestic avenues and foreign Eurobond issues, private placements, withdrawals from international financial institutions, and other channels.

Debt chief Stefan Nanu indicated plans for the finance ministry to issue more non-green Eurobonds by the end of the year.

In 2023, Romania has issued over 83 billion lei in domestic bonds and treasury bills, aided by strong demand. Additionally, the country has accessed foreign markets four times, borrowing a total of $4 billion and 7.2 billion euros, which includes green bonds maturing in 2036. The volume of retail bond sales has also grown.

So far this year, Romania has revised its funding target for 2023 twice, ultimately setting it at 203 billion lei, up from an initial figure of 160 billion lei, to account for a larger-than-expected budget deficit.

Major credit rating agencies have assigned Romania their lowest investment ratings but with a stable outlook. Fitch recently reaffirmed Romania’s credit rating at BBB-, citing robust inflows of EU funds; it noted, however, that the country must implement “meaningful” fiscal adjustments in the medium term, although fiscal missteps have impacted policy credibility.

Despite the rising debt levels, Fitch reported that the ratio of interest payments to revenues stands at 6.4%, which is more favorable compared to the peer median of 7.5% for countries rated BBB.