Radio România Internațional

Tag: government debt

  • Budget deficit like in pandemic times

    Budget deficit like in pandemic times

     

    Romania’s budget deficit in the first 11 months of this year reached 7.11% of its Gross Domestic Product (GDP), over EUR 25 bln, according to information obtained by the Romanian media. The government’s deficit target for 2024 is 8.58% of GDP, over EUR 30.5 bln, which means that substantial spending is planned for December as well. A higher budget deficit as a share of GDP was most recently recorded in 2020, the year of the COVID-19 pandemic, when the indicator stood at 9.6%.

     

    The deficit is the difference between the state’s lower revenues and the higher expenses it must cover. Since the government does not have this money, it has to borrow it. The higher and longer the deficits, the more alarming the public debt growth rate.

     

    Together with slower economic growth, as expected for Romania in the coming years, large budget deficits can lead to alarming situations, such as the one forecast for 2031. For that year, the fiscal plan stipulates that Romania will pay 3.5% of GDP (EUR 20 bln) in interest on government debt, as opposed to 2% today.

     

    Official data and data collected by the press show that the new government will take over a difficult economic situation: a huge budget deficit, interest on government loans that have broken the European Union record, and European funds partly suspended.

     

    At the moment, the incumbent government, comprising the Social Democratic Party and the National Liberal Party, cannot draft the budget law for next year. With the new parliament not yet convened, the future parliamentary majority, on which several budget chapters depend, is not clear. And without a national budget, city halls cannot prepare their own budgets, and citizens will immediately feel the effects.

     

    The Liberal finance minister Marcel Boloş acknowledged that “political instability is creating difficulties with regard to the strategy for borrowing on foreign markets to ensure the financing of the budget deficit and public debt, as the budget for 2025 cannot be finalised.”

     

    The Social Democratic PM Marcel Ciolacu said in recent months that the colossal loans taken out by his executive team were primarily intended for investment. He mentioned the example of Western European countries such as Portugal, Spain or Italy, which went into massive debt before creating their remarkable present-day infrastructure. Commentators say, however, that much of the deficit is due to electoral measures—e.g. substantial increases in pensions and salaries in the public sector—implemented by the government in 2024, which in Romania was a year with all types of elections: elections for the European Parliament, as well as local, legislative and presidential ballots. (AMP)

  • Romania sees rising public debt levels

    Romania sees rising public debt levels

    Government debt rose in July to over 876 billion lei (that’s around 175 billion euros), from 860 billion lei in the previous month, according to data published by the finance ministry. As a percentage of GDP, government debt went up to 52% from 51.1% in June, according to the National Institute for Statistics. The highest share of the debt, around 147 billion euros, is represented by loans obtained through the issuing of state bonds.

    In this context, the government approved an emergency order raising the public debt ceiling, in keeping with the EU methodology, to 53% of GDP for the end of 2024. According to a government statement, this change aims to ensure flexibility in attracting the needed financial resources for the implementation of the 2024 financing plan and the pre-financing for 2025, as well as maintaining the hard currency reserve at the disposal of the State Treasury at a comfortable level. In August 2023, Romania had a total government debt of around 147 billion euros, accounting for 48.9% of GDP. In 2019, it stood at some 74 billion euros, that is 35% of GDP. This is in effect money that the Romanian state paid back to its lenders, including interest rates.

    Years of high levels of budget debt, keeping taxes low and an inability to properly collect taxes pushed Romania’s public debt to record high levels, going up three times between 2017 and 2023, while GDP only went up two times. Basically, public debt grew more than the economy. What’s worrying is not so much the figures or the percentages. Most states borrow in order to fund various budget expenses. What’s worrying is Romania’s lack of fiscal discipline, as well as the inconsistency of those in power in recent years, especially in 2024, a busy election year, with European, local, presidential and legislative elections.

    As was to be expected, the budget deficit also rose to alarming levels. In 2023, the deficit level expected for the end of the year was 4.4% of GDP, accounting for 70 billion lei. At the end of 2023, its level rose above initial estimates to reach 5.6% of GDP, that’s 93 billion, which accounts for a rise of almost 30%. Moreover, the government estimates a deficit of some 8% of GDP, one of the highest in the European Union, when it should be under 3%. Romania has been in the Excessive Deficit Procedure for years. Budget deficit is when a country’s government spends excessively, more than it earns from taxes and duties.

  • October 27, 2024

    October 27, 2024

    Debt – Romania’s government debt rose, in July, to 876.288 billion lei, from 860.331 billion lei in the previous month, according to data published by the Finance Ministry. As a percentage of the GDP, the government debt rose to 52% from 51.1% in June. Most of this debt was represented by government bonds. The Romanian government approved, on Wednesday, an emergency ordinance which establishes the increase in the public debt ceiling, according to the European Union’s methodology, to the level of 53% of the gross domestic product for the end of 2024. According to the government, this change aims to ensure flexibility in attracting the financial resources necessary to implement the financing plan of 2024, to pre-finance the needs in the year 2025, as well as to maintain the foreign currency reserve at the disposal of the State Treasury at a comfortable level.

     

    Moldova – The pro-European President of the Republic of Moldova, Maia Sandu, accused, on Sunday, during an electoral debate, her opponent in the second round of the presidential election, the pro-Russian Alexandr Stoianoglo, of being just a ‘Trojan horse’, a man through whom others want to rule the country’. In reply, Stoianoglo, who is supported by the Socialist Party from the Republic of Moldova, said that he is a ‘firm supporter of the country’s European integration’ and that he wants ‘the transformation of Moldova into an active provider of peace and security in the region’. The electoral debate took place without a moderator, because the journalist proposed to be moderator by the Stoianoglo camp was accused of not being honest and impartial. In the first round of the presidential election, the incumbent president obtained 43% of the votes, while Stoianoglo took 26%. The second round of the presidential election will take place on November 3. A week ago, together with the first round of the presidential election, there was also a referendum for EU integration, which was validated and in which the pro-accession voters were 12 thousand more. Maia Sandu pointed an accusatory finger to the meddling in the electoral process of some criminal groups that would have acted alongside foreign forces hostile to the interests of the country. Moscow denied any interference in the elections and referendum.

     

    Georgia – Georgia’s ruling party, Georgian Dream, won the parliamentary elections against a pro-European opposition coalition that refused to concede defeat, the Central Electoral Committee announced on Sunday morning, according to AFP and Dpa. The Georgian Dream, a conservative and nationalist party led by billionaire Bidzina Ivanishvili, allegedly obtained 54% of the votes, compared to 37.58% for the pro-European coalition, according to the counting carried out in over 99% of the constituencies.  The pro-European opposition coalition did not recognize the preliminary results and announced the organization of protests. The opposition accuses the Georgian Dream, in power since 2012, of pro-Russian authoritarian drift and Georgia’s distancing from the EU and NATO, which it intends to join. Brussels has warned that Georgia’s chances of joining the EU will depend on the elections held in the former Soviet republic in the Caucasus, which has enshrined this aspiration in its constitution. Georgia was rocked, in May, by protests against a law on ‘foreign influence’, after the model of the Russian legislation on ‘foreign agents’ used to crush civil society, AFP reports.

     

    Winter time – Romania switched to winter time on Saturday night to Sunday. The clocks were set back by one hour, so that Sunday will have 25 hours and will be the longest of the year. Changing the time twice a year is based on the idea of ​​saving energy, by aligning the interval of human activity with that of natural light. Although this is the most important argument for changing the time, there are studies that suggest that the energy savings are minor, and citizens are more and more complaining about negative health effects. The EC and EP tried to abandon this system as early as 2021, but the member countries did not agree on which of the systems should be kept.

     

    Sofia – Voters in Bulgaria vote on Sunday in new round of early parliamentary elections, the seventh legislative elections in the last three and a half years, press agencies report. The new election became necessary because no party managed to form a government after the early legislative elections held on June 9. Polls show that the pro-Western center-right alliance GERB-SDS, led by the former Prime Minister Boiko Borisov, will emerge as the strongest political force in these elections. It is anticipated, however, that the Bulgarian parliament will remain fragmented, and building a coalition will be difficult even after these elections. (LS)