Private foreign debt soars

It is substantial and it keeps growing. We are talking about the private foreign debt, which went up 4.3% in the first three months of the year and reached $5.94bn by March 31. The private debt service amounted to $161 million in the first quarter.

The restrictive policies promoted by the Finance Ministry in the course of time and by the National Bank at times, the difficult access to financing on the domestic market and the excessive costs in those cases where a loan was possible to take are now all turning against NBR and showing in the alarming level of this type of indebtedness.

What are the risks involved in this increase given there is no co-ordination of the maturities of the debts contracted? The amassing of maturities within a certain time frame, as well as the risk of a serious depreciation of the ROL against the currency of the loan may create problems. It is also true that the companies to have independently contracted foreign loans are large entities and branches of various multinationals, which derive revenues in foreign currency, as well. The risk that remains is the pressure created by the foreign currency outflows the moment the payments on loans are made. “The capital outflows early this year may also be due to refinancing the foreign debt of private companies, besides profit repatriation,” NBR vice-governor Cristian Popa says.

NBR Governor Mugur Isarescu, however, says the private foreign debt is not a serious issue yet, but “something to look at, although it needs to be reconsidered in relation to the monetary policies.”

He says the current level of the debt may be a concern, but not necessarily a reason to worry.

“The repayment of these loans might induce higher demand on the forex market at some point,” Isarescu said.

“I disagree (i.e. with the potentially higher pressure on the forex market). The banks have enough foreign currency to cope with the repayments the clients might have to make on their foreign loans. This money comes from foreign currency deposits, from the amounts repatriated by those working abroad. Let’s make it plain and clear, the banks have enough foreign currency,” Radu Ghetea, chairman of the Romanian Association of Banks (ARB) told Ziarul Financiar.

oana.nuta@zf.ro