New Cabinet to Balance Public Finances

The government of Romania voices determination to balance public finances and implement responsible economic policies

Roxana Vasile, 26.06.2025, 13:50

The Romanian government is determined to balance public finances and implement responsible economic policies. This is the message of PM Ilie Bolojan at a meeting on Wednesday with officers of the Fitch rating agency, as the authorities try to avoid the country’s downgrade to the junk category, i.e. not recommended for investments.

The same risk looms from Standard & Poor’s and Moody’s, which are to make recommendations to the business environment based on assessments that they will carry out in September and October. By then, in August, Fitch is to decide whether or not to improve the current rating. So in Wednesday’s meeting with the agency’s officials, the talks focused on measures that can improve financial indicators and strengthen investor confidence in the Romanian economy.

Taking part were PM Ilie Bolojan, the deputy PM Tánczos Barna, a finance minister in the previous Cabinet, as well as the current holder of this post, Alexandru Nazare. The meeting with Fitch had been prepared the day before by PM Bolojan and minister Nazare, who analysed state budget revenues, reviewed a set of measures to improve them and discussed some legislative amendments, such as the Insolvency Law, in order to collect VAT much better.

But how likely is it at this moment that Romania’s rating will be downgraded to junk? The economic and financial analyst Dragoş Cabat, a member of the CFA Romania Board of Directors:

Dragoş Cabat: “The probability is still rather high. It used to be somewhere around 80-90%, now I think it has dropped to 40-50%. If in the coming days we manage to convince both the officials from the National Bank of Romania and the government, meaning the PM and the finance minister, first of all, that the measures to reduce the budget deficit are sustainable and can be implemented in the short term, then it is very possible that we will get at least six months from rating agencies, until of course we see whether these measures can really be put into practice.”

According to Dragoș Cabat, in the unwanted situation of being downgraded to junk, Romania would have much more difficulty finding money internationally to finance its huge deficit, and if it did manage to find it, it would pay much higher interest rates.

At the same time, some investors could leave the local market. And all of this might translate into higher costs for ordinary Romanians, probably higher inflation, a pressure on the exchange rate, lower salaries in the private sector, growing unemployment, in short, lower quality of life. Adding to these could be an increasingly greater pressure from the European Union and the possible intervention of the International Monetary Fund, which the analyst Dragoș Cabat views as the harsher and more merciless solution for the population. (AMP)