Romania’s foreign debt increased, in the past three years, by over 38.8 billion euros, with the dependence of the private sector from foreign funding, in a period of crisis of international markets, contributing to the recent downgrading of the country’s rating, writes weekly Capital.
“The largest part of the debt has been generated by the private sector. Much of the money has gone to people’s consumption, but much has also gone to the real estate sector or as investment in the real economy, “ said Matei Paun, managing partner of BAC Romania, a consulting company for mergers, acquisitions and financing.
He also believes that the loan for consumption is “an inefficient way to use credits,” and so “the use of credits for the development of the real estate sector is inefficient, notably in speculative conditions.”
In June 2005, the foreign debt of Romania stood at 26.8 billion euros, and because loans worth more than one billion euros, on the average, were made each month, 65.6 billion euros had been reached at the end of the first half of this year.
In June 2005, the foreign debt of Romania stood at 26.8 billion euros, and because loans worth more than one billion euros, on the average, were made each month, 65.6 billion euros had been reached at the end of the first half of this year.
As for Romania’s public and publicly guaranteed debt, it stood at a constant level, in the past three years, at almost ten billion euros.
In the said period, the foreign loans contracted by the banks in Romania rose more than four times, they reached 22.2 billion euros, at the end of the first half of the year.
In the said period, the foreign loans contracted by the banks in Romania rose more than four times, they reached 22.2 billion euros, at the end of the first half of the year.
Very rapid growth has been reported, of late, in the short-term foreign debt, which has been generated mainly by the private sector. “If at the end of 2004, the short-term foreign debt stood at three billion euros, in the middle of this year, it exceeded 20 billion euros.
I would say that this rise in the short-term debt is related to easy access of Romanian enterprises to financial resources, but also to the fact that, in the past years, financing was carried out more in foreign currency, and less in Romanian currency, “ said Mihai Tanasescu, Romania’s representative to the International Monetary Fund.
On the other hand, Tanasescu mentions the risk that “where companies do not succeed to pay their debts, they should diminish the number of their employees, and even halt activity, with repercussions on the economic growth, and also on social issues.”
According to BCR, in the years to come, a tendency will be noticed to raise the foreign debt and its estimated level will reach about 42% of GDP, at the end of this year, and 45% of GDP, at the end of 2009.
According to BCR, in the years to come, a tendency will be noticed to raise the foreign debt and its estimated level will reach about 42% of GDP, at the end of this year, and 45% of GDP, at the end of 2009.
In the difficult context in the international financial markets, representatives of Standard&Poor’s believe that Romania’s financing needs, in 2009, will stand at around 125% of the revenues of the current account and the usable reserves.
Analysts think it is likely that foreign banks reduce the credit lines for their subsidiaries in Romania, which will significantly drop the economic growth in 2009.
Analysts think it is likely that foreign banks reduce the credit lines for their subsidiaries in Romania, which will significantly drop the economic growth in 2009.
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