Ministries no longer allowed to contract foreign loans

The Romanian ministries will no longer be able to contract foreign loans on their own and then ask the Finance Ministry to simply secure the credits, which they have been doing so far, in accordance with the law.
In the past few years, the Transports and the Industry Ministries have taken significant loans. More exactly, the institutions subordinated to these ministries (CFR Marfa, Transelectrica, Nuclearelectrica and the National Housing Agency) have gotten the state to pledge for hundreds of millions of dollars in loans. Consequently, as some of the credits were more expensive than the loans obtained by the state, it was only natural for the Finance Ministry to react.
“Debt management begins when a loan is contracted, when all its terms are defined, including the debt service,” says Enache Jiru, a state secretary with the Finance Ministry, in charge with the foreign public finances.
The Finance Ministry will be the only authority entitled to contract foreign loans on behalf of the various ministries, in view of better management of Romania’s foreign public debt, according to a modification draft of the legislation in this field. It is not clear yet whether the institutions reporting to the ministries will also lose their right to direct loan negotiations.
Foreign debt increased by 5 billion dollars in the past three years, up to more than 15.1 billion dollars. Last year alone, public debt added 1.4 billion dollars, up to $6.3bn, while the publicly guaranteed debt grew 500 million dollars, up to $3.2bn.
The total value of the foreign loans directly contracted by the ministries or pledged by the Finance Ministry exceeded 1.6bn dollars at the beginning of 2003, with $972 million actually used.
Half of the 1.6 billion dollars accounted for credits obtained by the Ministry of Public Works, Transports and Housing. In the first two months of the year, budget spending in the account of the foreign loans taken by the ministries amounted to $178 million.
Romania’s foreign debt service revolves around 1.7 billion dollars this year.
The new strategy for the foreign debt management was drafted with the help of the International Monetary Fund experts. For coordinated management of the foreign debt, the Finance Ministry is no longer willing to just pledge the reimbursement of the loans contracted by various ministries, planning to get the loans itself instead, by getting involved in the negotiation of the loaning conditions.
razvan.voican@zf.ro ; sorin.pislaru@zf.ro