Romania's public debt rose by RON 30 billion (EUR 6 billion) in September to RON 917 billion (EUR 184.3 billion) at the end of the month, after the government tapped on September 19 the international bond market by raising the equivalent of EUR 5 billion with three issues denominated in euros (two issues) and US dollars.

The debt to GDP ratio rose to 54.4% at the end of September, from 52.7% at the end of August and 48.8% at the end of 2023. 

At 54.4%, the country's indebtedness is higher than expected by the S&P ratifying agency at the end of 2025 (53.2%). 

Romania issued only Samurai bonds in small amounts in Q4 and will probably end the quarter with no other FX bond issue. However, the deficit is seasonally wide in the last quarter of the year, and it should be financed somehow, most likely from the domestic market or from the Treasury's reserve. But the higher GDP used as the denominator at the end of the year (as opposed to GDP in 12 months to June currently used) will push down the indebtedness ratio – probably not as low as the 51.7% level expected by S&P. 

The European Commission projected, under the November 15 Autumn Forecast, 52.2% of GDP public debt ratio for Romania at the end of this year, followed by 56.1% at the end of 2025 and 59.7% at the end of 2026 – assuming no fiscal corrective package is enforced. 

The 7-year fiscal consolidation plan submitted by Romania to the European Commission envisages 52.2% of GDP public debt at the end of this year, followed by 55.7% at the end of 2025 and 58.5% at the end of 2026. The debt to GDP ratio would exceed 60% in 2027 and not drop below this benchmark by the end of 2031.

The country's debt rose by EUR 26.8 billion in January-September 2024, more than it surged during the entire Covid-19 year 2020 (EUR 25.9 billion). The debt to GDP ratio, however, advanced by only 5.6 percentage points (pp), half the 11.7 pp advance in 2020, thanks to the higher nominal GDP this year. 

Besides the FX bonds, the Treasury also used the domestic market to finance its rising deficit: the stock of public debt denominated in local currency (mostly bills and bonds on the local market) rose by RON 9.6 billion or nearly EUR 2 billion. 

iulian@romania-insider.com

(Photo source: Alexandru Marinescu/Dreamstime.com)