Short-term private debt gathers pace again

Romania's short-term foreign debt, the indicator that thwarted Romania's macroeconomic policies at the end of 2008 and forced the NBR and the Government to resort to help from the IMF and the European Commission a few months later, has started to climb again, posting a 25% rise at the end of August against the three-year low recorded in January, to 17.1 billion euros. Around 90% of the debt is held by the private sector.
The increase occurred in two stages - a leap in spring and another one in July and August. The NBR (National Bank of Romania) has yet to publish data on the detailed structure of the foreign debt beyond June, so there is as yet no clear explanation for the increase recorded at the end of the summer.
In June, the bulk of the debt was held by banks and private companies, with volumes amounting to 6.3 and 5.2 billion euros respectively. The state had a one billion-euro debt.
In the first six months of the year the increase was distributed across all three sectors, with the state contributing 300 million euros, banks 150 million euros and companies nearly 500 million euros.
"The major issue with managing the debt is to what extent the debt is short term and whether it can be turned into longer-term debt," says economics professor Daniel Dăianu. He notes that the state's overall debt is climbing fast, with the current account deficit now being entirely generated by the public sector, while the private sector has a positive contribution. The loan from the IMF and the European Commission has ensured the state's financing until 2011, but the repayment is set to start in 2012, and will be scheduled over four years.