The foreign loans that private companies have to repay exceeded those taken out by the state for the first time in October 2005, reaching 12.3 billion euros in November, while the foreign public debt fell slightly, to 11.27 billion euros, National Bank (NBR) data show.
The growth pace of the loans taken out by private companies has constantly sped up over the last five years, meaning that the private debt went up by 3.3 times during this period, while the public debt came to be only 1.5 times higher.
A real surge in the private foreign debt was registered in 2004, when the volume went up by more than two billion euros. The trend came at a time when interest rates for RON loans had not yet gone down, which they did significantly as late as 2005, while interest on dollars and euros on the international markets had stagnated at all-time lows for a long period, which made foreign credit more attractive to companies.
The banks themselves took advantage of these circumstances, and resorted to lines of credit from abroad. The result: the upsurge in the foreign exposure of the banking system, which increased by ten times between 2000 and 2005, going up from 694 million euros to some 7 billion euros at the end of last year. Actually, this was the simplest solution banks found to finance the surge in demand for loans, especially for those in foreign currency.
All the inflows of foreign currency, which peaked in 2005, could be seen in the pressures causing the appreciation of the RON, especially since the NBR has reduced its purchase interventions to almost none.
In the case of the foreign debt accumulated by the state and its entities, there are no problems with the repayment of the principal and loans. However, in case of private debt, a repayment schedule is harder to outline.
Over the last two years, the state has mainly attracted foreign funding for projects, rather than for sustaining the budget deficit, which has come to rely on domestic loans for funding. Therefore the public service debt remained moderate, and even went down slightly, from 1.3 billion euros in 2005 to an estimated 1.25 billion euros for 2006.
The state will only take or secure foreign loans mainly for infrastructure projects or for fuel acquisitions. More than that, state-owned enterprises like Termoelectrica have managed to secure funding without requiring the Finance Ministry to explicitly guarantee it.
On the other hand, the companies that borrowed money from abroad do not have such a hard time repaying their loans either, seeing as the RON has kept significant room for appreciation, despite corrections at the end of 2005.
The booming appetite for foreign funding could be tempered in 2006 due to last year”s drastic fall in RON interest rates, despite this trend being blocked by the inflation that still hovers at high levels.
In any case, it is becoming obvious that as the state pulls out of the economy, the private sector is the main customer of foreign funding, with the banking sector leading the pack – and also having to bear the possible unfavourable exchange rate trends. razvan.voican@zf.ro