Romania: Fiscal Consolidation And Diversification Of Sources

(MENAFN- ING) Fiscal policy: the real test of fiscal measures

The fiscal consolidation initiated by the government after the election brought the public finance deficit to 7.7% of GDP (in cash terms) last year. The MinFin indicates a deficit target for this year of 6.2% of GDP. This year's budget depends on the government's ability to push through further fiscal and reform measures. However, overall, we see the story moving in a positive direction, but in our forecast we see a deficit slightly higher than the government indicates at 6.4% of GDP.

Either of these results should be, in principle, welcomed by rating agencies, and we think that an outlook improvement is on the table if the deficit improves at a better than expected rate. Otherwise, any rating uplift is more likely a story for 2027, once the fiscal adjustment proves resilient to planned changes in government leadership.

Gross financing needs and ROMGBs issuance (RONbn) Local issuance: trying to keep pressure off the local currency market

Although the state budget for this year has not yet been fully presented, the Ministry of Finance provides some funding figures for our preliminary estimates. We forecast gross borrowing needs to increase slightly from RON268.3bn to RON275bn (+2.5%, 13.4% of GDP), mainly due to high domestic and foreign maturities. Gross issuance of ROMGBs will increase from RON97.0bn to RON105.5bn (+8.7%). On the other hand, net issuance will decline from RON55.8bn to RON33.4bn (-40.1%).

Since last year, the Ministry of Finance has been trying to diversify its sources of financing as much as possible, and we should see efforts to avoid pressure on the ROMGBs market this year. Therefore, we expect another strong year for retail bonds with issuance around RON50bn (RON47.3bn last year), with risks to the upside potentially offsetting some ROMGBs issuance.

The rest of the borrowing needs should be covered by FX issuance and other FX sources, mainly EU money and private placements or loans. However, recent years have shown fiscal risks and issuance on both sides, which remains the case this year, depending on the success of fiscal consolidation.

Financing needs for 2026 (RONbn) FX issuance: long-awaited improvement in the technical picture

Romania looks to be the most interesting name in CEE in terms of the shift in Eurobond issuance this year. Following two record years when issuance surpassed $18bn (more than €15bn), the combination of fiscal tightening and large expected EU fund inflows makes the government's plans for lower gross and net Eurobond issuance (€10bn and €6.75bn respectively) much more credible than in previous years.

As in previous years, the risk of some fiscal slippage, as per our deficit forecast, does leave scope for slightly higher Eurobond issuance than planned, especially given the remaining uncertainty over the timing of further EU disbursements.

Romania EUR & USD international sovereign bond issuance (USD equivalent)

The delayed budget has meant a slower start to the year than normal, before the announcement of a long-awaited deal this week in USD and EUR, raising $2bn and €3bn respectively. This multi-currency deal makes sense, across USD and EUR, with the government in recent years accepting investor concerns about the significant volume of EUR issuance acting as a technical headwind and trying to remain active in the USD market.

While all maturing debt this year is EUR-denominated (€3.25bn), meaning gross issuance should also see a skew towards EUR, net issuance will likely be more evenly split between EUR and USD.

MENAFN26022026000222011065ID1110795315