Romanian economy in for rising interest rates

Mugur Isărescu, NBR governor, said Romania has reached the
limit when it comes to the state borrowing cheap, which means that
the entire economy should be prepared to take into account rising
interest rates.
Since the start of the year, the Finance Ministry has been
striving not to pay an interest rate of above 7% for RON, but the
sums it raises are quite small compared with its funding need.
However, banks’ push to get a higher interest rate is quite strong.

For euros, the Finance Ministry in late July paid banks a 4.9%
interest per annum, raising 1.2bn euros. Next month, the Finance
Ministry should repurchase bonds worth 1.4m euros issued last year,
but it will most likely try to roll them over given that funding is
at the limit.
“We are at the limit of a relatively cheap funding of our
deficits. Should we have bigger deficits, the entire deficit
increase goes into the interest account, for the rising borrowing
costs,” Isărescu said.
In his opinion, the medium-term challenge is securing fiscal
stability without endangering economic growth outlooks.