Romania Increases 2024 Funding Plan to $48.3 Billion to Cover Budget Deficit and Pre-Finance 2025 Needs
In a strategic move to ensure financing for a larger budget deficit and pre-finance 2025 needs, Romania has raised its 2024 funding plan by roughly a fifth to 217 billion lei ($48.3 billion), debt managers announced on Monday. This decision comes as the country faces challenges in meeting its deficit target of 5% of economic output due to high spending.
Debt managers have already covered 91% of the initial funding plan of 181 billion lei, but with the deficit target now out of reach, there are expectations of tax increases from 2025. To manage currency exchange risks and leverage the domestic market's capacity for bond absorption, the additional net funding for 2024 will be sourced from domestic and foreign Eurobond issues, private placements, withdrawals from international financial institutions, and other channels.
Romania has been proactive in its fundraising efforts, having sold over 83.0 billion lei worth of domestic bonds and treasury bills this year, supported by strong demand. The country has also tapped foreign markets multiple times, including issuing green bonds in 2036. Additionally, Romania has increased its retail bond sale volumes to meet its funding targets.
With major rating agencies assigning Romania their lowest investment grades with a stable outlook, there is a focus on fiscal adjustment in the medium term. Fitch recently affirmed Romania's credit rating at BBB- with a stable outlook, highlighting the need for meaningful fiscal adjustments to maintain policy credibility.
Despite the rising debt levels, Romania's interest payment to revenues ratio is relatively favorable at 6.4%, compared to the BBB peer median of 7.5%, according to Fitch.
In conclusion, Romania's decision to increase its funding plan for 2024 reflects the country's proactive approach to managing its budget deficit and future financial needs. Investors should monitor how Romania executes its funding strategy and implements fiscal adjustments to maintain policy credibility and manage debt levels effectively.