Romania sees rising public debt levels
Romania’s government debt rose to 52% of GDP, while the estimated 2024 budget deficit is also very high.
Mihai Pelin, 28.10.2024, 14:00
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.
