Western Balkans citizens legally resident in EU equal to 14% of region’s population
International Ice Hockey Federation (IIHF) has stripped Belarus of the right to hold the World Championship this year
Alexei Navalny arrested on arrival as he returns home
LONG READ: The oligarch problem
Russia's National Welfare Fund accounts for almost 12% of GDP
Police arresting activists ahead of Saturday’s demonstration in support of Navalny
Biden seeking a five-year extension to START II missile treaty
Russian consumer confidence index drops q/q, y/y in 4Q20
Western Balkans and Ukraine urged to scrutinise coal subsidies
Oligarchs trying to derail Ukraine’s privatisation programme, warns the head of Ukraine’s State Property Fund
Private finance mobilised by development banks up 9% to $175bn in 2019
VISEGRAD BLOG: Central Europe's populists need a new strategy for Biden
OUTLOOK 2021 Lithuania
EBRD says loan to Estonia’s controversial Porto Franco project was never disbursed
Czech MPs pass protectionist food law in violation of EU rules
M&A in Central and Eastern Europe fell 16% in value in 2020, says CMS report
Hungarian vehicle makers hit by supply chain shortage
COVID-19 and Trump’s indifference helped human rights abusers in 2020
OUTLOOK 2021 Poland
OUTLOOK 2021 Slovakia
BRICKS & MORTAR: Rosier future beckons for CEE retailers after year of change and disruption
FDI inflows to CEE down 58% in 1H20 but rebound expected
Albania needs reforms for e-commerce to thrive, says World Bank
BALKAN BLOG: US approach to switch from quick-fix dealmaking to experience and cooperation
Corona-induced slump in global clothing sector dragged down Albania’s 2020 exports
Bosnia's exports in 2020 amounted to BAM10.5bn, trade deficit to BAM6.3bn
Bulgaria's Biodit first company to IPO on new BEAM market
Bulgaria’s government considers gradual easing of COVID-related restrictions
Sofia-based LAUNCHub Ventures holds first close of new fund on €44mn
Spring lockdown caused spike in online transactions in Croatia
ING: Growth in the Balkans: from zero to hero again?
Labour demand down 28% y/y in Croatia in 2020
EBRD investments reach record €11bn in pandemic-struck 2020
OUTLOOK 2021 Moldova
Storming parliaments: New Europe's greatest hits
World Bank revises projection for Moldova’s 2020 GDP decline to 7.2%
Montenegrins say state administration is most corrupt institution
North Macedonia plans to cut personal income tax in IT sector to zero in 2023
Romania government to pursue “ambitious” timetable for justice reforms
OUTLOOK 2021 Romania
OUTLOOK 2021 Slovenia
Slovenia’s opposition files no-confidence motion against Jansa cabinet
Slovenia’s government to release funds to news agency STA after EU pressure
UK Moneyhub picks Slovenia for post-Brexit European base
D’S Damat franchise deals ‘show Turkey’s hard-pressed mall operators becoming their own tenants’
Turkey’s benchmark rate held as concerns over faltering recovery come to fore
Turkish lira breaches HSBC’s stop-loss, Turkey ETF signalling outflows
CAUCASUS BLOG : What can Biden offer the Caucasus and Stans, all but forgotten about by Trump?
Armenia ‘to extend life of its 1970s Metsamor nuclear power plant after 2026’
OUTLOOK 2021 Armenia
COMMENT: Record high debt levels will slow post-coronavirus recovery, threaten some countries' financial stability, says IIF
OUTLOOK 2021 Georgia
Iran’s Khamenei menaces private citizen Trump with image of aircraft shadowing blond golfer
Iran’s technology minister indicted for failing to properly implement internet censorship
No US move to rejoin Iran nuclear deal imminent, say Biden national security nominees
TEHRAN BLOG: Will Biden bet on a quick return to the Iran nuclear deal?
Central Asia vaccination plans underwhelm, but governments look unruffled
Fears of authoritarianism as Kyrgyz populist wins landslide and backing for ‘Khanstitution’
Mongolia's PM quits amid protests over treatment of mother with coronavirus and newborn baby
Mongolia's winter dzud set to be one of most extreme on record says Red Cross
Mongolian coal exports to China paralysed as Beijing demands virus testing of truck drivers
Mongolia fears economic damage as country faces up to its first local transmissions of coronavirus
OUTLOOK 2021 Tajikistan
OUTLOOK 2021 Turkmenistan
Turkmenistan: How the Grinch stole New Year
COMMENT: Uzbekistan is being transformed, but where are the democratic reforms?
Download the pdf version
The issue of Romania's foreign debt has been signalled many times in this column, especially after 2016, when its level rapidly passed the threshold of €90bn. In those days, the actual level was considered to be “close to the brim” and measures were recommended to control the speed at which the debt was rising. It seems that the Romanian authorities did not focus on this and the 2020 pandemic found Romania in a difficult position from this point of view. One year ago, in November 2019, a new government led by the National Liberal Party was formed and there were hopes that the external debt would be controlled. But it was not to be. As presented below, the actual level has increased quite fast during the last year. It is estimated that the ratio of external debt to GDP climbed from 48% to more than 56%. This is a sizeable rise, which was also accelerated by the decline of GDP this year. The IMF predicted that the Romanian GDP will contract this year by 4.8%. There are more alarming estimations going up to -10% as the pandemic has continued to evolve out of control in the fourth quarter of 2020.
The upcoming parliamentary elections on December 6 are yet another major risk in the fight to control the spread of the disease. The new level of external debt of €117.2bn (of which €83.6bn is long-term) was rightly signalled by the National Bank of Romania (BNR) in November this year, but there is no guarantee that the politicians will listen to the central bank. This is normally the fate of such correct signals during election periods, but the risk of too much foreign debt is too high to be ignored. The gap between the level of foreign debt and the international reserves (without gold) increased as shown below in Graph 1.
Table 1: Romania - Key external indicators, November 2019 - October 2020, €bn
Source: Computed based on BNR’s database; GDP figure from INS for 2019 is provisional and for 2020 is an unofficial estimation.
There are currently intense debates in Romanian society regarding the current level of the external debt, about the fact that such a large debt was run up mainly for consumption rather than for investments, the cost of borrowing from abroad rather than accessing the EU funds designated for Romania and, more importantly, on who is going to pay this sizeable debt. The most striking feature of the Romanian debt is the increase of its public share, which is the external debt contracted directly by the Ministry of Public Finance and the local public administrations (€49.1bn as of end-September 2020 compared with €39.4bn as of end-2019).
Graph 1: Romania: External debt, international reserves and gold, €mn
Source: Computed based on BNR’s database
This debate is not something new. Even during the socialist era, the level of external debt was a clear concern for large segments of population. During the recent publication of some of the Securitate (secret services) files, one case came to light about a protest in Brasov by ordinary citizens regarding the high level of foreign debt in 1981 (see Fig. 1 left).
Figure 1: Romania - A page from a Securitate file (1981) on foreign debt and gold artefacts
Source: CNSAS - Selection from files of former Securitate - 2020 and the National Museum of Romania
However, the level of this indicator was then a mere $10bn. Now, at €117bn, the level of the foreign debt does not seem to be a priority for the Romanian authorities, which are basically borrowing in foreign currencies from abroad and domestically at a rate of almost €1bn per month. However, future generations will have to pay it back.
Among all this disturbing news, there is a ray of hope which is related to the price of gold on the international markets (see Graph 2). Romania currently has holdings of 103.6 tonnes of gold which are valued at above €5.35bn (market price as of end-October 2020). Together with the foreign currency reserves at €33.7bn, the total of international reserves stood at €39.1bn as of end-October 2020 (some 33% of its total gross external debt). This good ratio should be preserved.
Graph 2: Gold - London quotes for gold, November 2019 - November 2020, USD/ounce troy
Source: BBC Market Data (WebFG - AM), November 16, 2020
The story of the Romanian gold is extremely convoluted, going back to Roman times. In modern days, it started with the transport of all Romanian gold to Moscow during the First World War (WWI) in 1916-1917. It was more than 100 tonnes in gold bars, precious coins and other artefacts of the national patrimony, including personal possessions and documents of Queen Mary of Romania. Only a few items (see Figure 1 right) were returned. The Soviet authorities declared many times that they had no knowledge of the fate of the Romanian treasure. More than 100 years later, Romania is still without its old national treasure which at current market prices would be valued at more than €5bn. At a heavy price indeed, the lesson was learned. During the Second Word War (WWII), the Romanian gold was well hidden in the country in a cave at Tismana Monastery (see Fig. 2).
Figure 2 - Romanian Gold during WWII at Tismana Monastery
Source: Author’s collection - 2020
This proved to be much safer, as all the gold was returned to the vaults of the BNR. Later, some of it was deposited abroad in London at the Bank of England. Irrespective of the price (which most likely will continue to fluctuate) gold has played and will continue to play a key role in ensuring Romania’s external equilibrium.
Soon after Romania started its transition to a market economy back in December 1989 with zero foreign debt, international reserves of $1.89bn and $100mn of gold holdings, the attitude of the Romanian authorities was that we have to borrow to modernise the country’s agro-industrial potential and infrastructure and to boost consumption. This was well understood. Then many governments came to office with promises that the economy will be reopened and investments stimulated. However, investments did not materialise in all sectors or were insufficient. On top of everything, the 2020 pandemic hit the Romanian economy and society strongly. Borrowing (internally and externally) continued at a much accelerated pace, but as soon as the pandemic is over (hopefully in early 2021), measures should be implemented to control the foreign debt. The access to EU grants and/or reimbursable funds, including those designated by the EU to fight the current pandemic, should be a high priority for the government. Any delays in this respect, as registered in the past, will not help Romania or its industrious people.
Alexandru M. Tanase is an independent consultant and former associate director, senior banker at the EBRD and former IMF advisor. These are personal views of the author. The assessments and views expressed are not those of the EBRD and/or of the IMF and/or of the NBR and/or of any other institution quoted. The assessment and data are based on information as of November 2020.
here to continue reading this article
and 5 more for free or purchase
12 months full website access including
the bne Magazine for just $250/year.
Register to read the bne monthly magazine for
Password could contain only
and have 8-20 symbols length.
Please complete your registration by confirming your
A confirmation email has been sent to the email
address you provided.
can't be empty.
No user with
this email address.
Access recovery request has expired, or you are using
the wrong recovery token. Please, try again.
Access recover request has expired.
Please, try again.
To continue viewing our content you need to complete
the registration process.
Please look for an email that was sent to
with the subject line
"Confirmation bne IntelliNews access". This email will have
instructions on how to complete registration
process. Please check in your "Junk" folder in
case this communication was misdirected in your
If you have any questions please contact us at firstname.lastname@example.org
Sorry, but you have used all your free articles fro
this month for bne IntelliNews. Subscribe
to continue reading for only $119 per year.
Your subscription includes:
For the meantime we are also offering a free
digital weekly newspaper to subscribers to
the online package.
Click here for more subscription options,
including to the print version of our
flagship monthly magazine:
Take a trial to our premium daily news
service aimed at professional investors that
covers the 30 countries of emerging
For any other enquiries about our
products or corporate discounts please
contact us at
If you no longer wish to receive
Magazine annual print
Website & Archive
Combined package: web
access & magazine print
Take a trial to our premium daily news service
aimed at professional investors that
covers the 30 countries of emerging Europe: