Romania might need less than one billion euros in foreign funding for the budget deficit and domestic debt next year, which is lower than shown by the previous forecasts, Enache Jiru, the head of the State’s Treasury said.
The Finance Ministry relies on a 0.3%-0.4% of GDP drop in the fiscal deficit initially projected for 2004, on the possibly better conditions for borrowing on the domestic market, as well as on significant inflows of foreign currency from privatisation processes. The money will be possible to use for funding certain investment projects and not only for reducing the public debt as until now. At present, the Finance Ministry maintains the option to reopen the eurobond issue released this summer and endorsed by a Government Decision this November.
“We may release a new eurobond issue next year and reopen last year’s, depending on the trend of the euro-denominated interest,” Jiru says.
He explains the new eurobonds are planned to mature in ten years, so that Romania could borrow at less than 5% a year in euros, compared to 5.75% for the previous issue.
On the other hand, Romania will need foreign currency to cover the current account deficit next year, which is scheduled to drop to 5.5% of GDP. Romania needs foreign currency inflows so that it would not find itself in the position of having to cover the deficit from the foreign currency reserve.
The Finance Ministry intends to speed up the direct access of the banks to the capital market. The current legislation has January 1, 2005 set as deadline, but it might be modified following amendment of the legislation on the capital market to be debated by Parliament. Enache Jiru says the direct entry of the banks as stock market operators would solve the issue of the brokers needed to conduct transactions with public securities on the capital market. Although the trading regulation has been in place since December 2002, the Finance Ministry has not issued public securities on the Stock Exchange until now, because no brokerage company has filed a request for licence, as none meets the minimal share capital criteria, which are very strict. The Finance Ministry and the Bucharest Stock Exchange have been pointing to each other in terms of responsibility for a year now, with Jiru saying that he has been expecting the Stock Exchange to come up with a new proposal to lower the minimal capital requirements for quite some time.
According to Jiru, the Finance Ministry next year is planning to resume the strategy to extend the maturity of the public securities, which it was unable to maintain in the second half of 2003 due to the rise in the interests on the market. razvan.voican@zf.ro