COVID-19 and Trump’s indifference helped human rights abusers in 2020
Durov rejects Western funds’ offer to buy 5%-10% of Telegram with $30bn valuation
Belarusian government sees $2bn of withdrawals, issues $580mn worth of bonds in 2020
Lukashenko: I am no enemy of the people
One of Russia’s biggest wood product companies, Segezha could be Sistema’s next IPO
The volume of the Russian National Wealth Fund tops $183.93bn as gold overtakes dollar asset for first time
New Ukrainian VC firm QPDigital aims to invest up to $100 million in digital startups
EBRD investments reach record €11bn in pandemic-struck 2020
FPRI BMB Ukraine: Most Ukrainians are optimistic about 2021 – poll
OUTLOOK 2021 Lithuania
EBRD says loan to Estonia’s controversial Porto Franco project was never disbursed
Estonian premier quits after Tallinn development scandal
Top Centre Party official suspected of corruption in Tallinn real estate scandal
Czech Pirates and Mayors approve final coalition agreement for 2021 elections
OUTLOOK 2021 Czechia
BRICKS & MORTAR: Rosier future beckons for CEE retailers after year of change and disruption
Romanian tech entrepreneurs expand into banking sector
OUTLOOK 2021 Hungary
Hungarian government remains silent after Capitol riots
Storming parliaments: New Europe's greatest hits
World Bank expects modest recovery for Europe and Central Asia in 2021
FDI inflows to CEE down 58% in 1H20 but rebound expected
OUTLOOK 2021 Slovakia
Slovakia to invest €1.2bn in digitisation
BALKAN BLOG: The controversial recipe for building up Albania
Heavy flooding causes chaos in parts of Southeast Europe
Vodafone Albania plans €100mn infrastructure investments after AbCom merger
OUTLOOK 2021 Albania
Kyiv accuses Bosnian President Dodik of lying about icon gifted to Russian foreign minister
Bosnia’s real GDP contracts 6.3% y/y in 3Q20
Sofia-based LAUNCHub Ventures holds first close of new fund on €44mn
ING THINK: Growth in the Balkans: from zero to hero again?
OUTLOOK 2020 Bulgaria
Labour demand down 28% y/y in Croatia in 2020
Zagreb Stock Exchange's Crobex10 index at highest level since March 5
OUTLOOK 2021 Kosovo
Arrera Automobili aims to launch Albania’s first supercar
World Bank revises projection for Moldova’s 2020 GDP decline to 7.2%
Moldova’s PM resigns to prepare the ground for early elections
Socialist lawmakers in Moldova scrap settlement on $1bn bank frauds
Montenegro’s new ruling coalition carves up top state jobs
OUTLOOK 2021 Montenegro
Vast tide of floating waste threatens Balkan hydropower plants
North Macedonia's manufacturing confidence indicator down by 8.5 pp y/y in December
OUTLOOK 2021 North Macedonia
Transparency International warns of high corruption risk in CEE defence sectors
Moldova fears flooding from Ukraine's planned Dniester hydropower plants
Romania’s industrial recovery paused in November
OUTLOOK 2021 Serbia
Slovenia’s government to release funds to news agency STA after EU pressure
UK Moneyhub picks Slovenia for post-Brexit European base
Slovenia’s dire COVID-19 situation in 4Q20 caused second economic dip
Slovenia’s Eligma completes €4mn funding round
Turkish opposition leader lawsuit demands one lira from Erdogan, police probe “bald” interior minister posts
Akbank takes over Istanbul's Palladium Atasehir shopping mall
OUTLOOK 2021 Armenia
Armenia’s PM cautions conflict with Azerbaijan “still not settled” after trilateral meeting with Putin
COMMENT: Record high debt levels will slow post-coronavirus recovery, threaten some countries' financial stability, says IIF
Russia, Kazakhstan pushing for oil production increases on the back of coronavirus vaccine-fuelled oil price optimism
OUTLOOK 2021 Georgia
Georgia’s political kingpin Bidzina Ivanishvili quits politics
Modern-day “Robin Hood” inspires Georgians drowning in debt
Iran’s navy conducts missile drill while analyst argues Trump even capable of nuclear strike in final days
TEHRAN BLOG: Who’s more credible? Johnson backing Trump’s Nobel chances or Iran applauding arrest warrant for US president?
Central Asia vaccination plans underwhelm, but governments look unruffled
Fears of authoritarianism as Kyrgyz populist wins landslide and backing for ‘Khanstitution’
OUTLOOK 2021 Kyrgyzstan
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
Mongolia in lockdown after suffering first local coronavirus transmissions
OUTLOOK 2021 Tajikistan
China business briefing: Not happy with Kyrgyzstan
OUTLOOK 2021 Turkmenistan
Turkmenistan: How the Grinch stole New Year
Turkmenistan: The dammed united
COMMENT: Uzbekistan is being transformed, but where are the democratic reforms?
OUTLOOK 2021 Uzbekistan
Uzbekistan’s Makro positions itself for growth in a more competitive market
Download the pdf version
The current pandemic has brought the issue of debts, including external ones, to the centre of economic debates. The question of the external debt of any country in the world has been and will continue to be of maximum importance. It is one key macro-economic indicator reflecting the connectivity of a certain economy with the rest of the world and international capital markets. It is a fundamental legal and economic commitment made in the name of the current and future generations by the debtor countries to pay back at maturity the amounts borrowed. This very indicator is more crucial in the current uncertain times, exacerbated by the 2020 pandemic which strongly hit developed and developing countries as well.
The issue of debt is also obvious in the case of the countries forming what is historically known as the Balkan region or simply the Balkans. There is no need to underline the important role played by the Balkan countries during history. Winston Churchill himself was apparently puzzled by the visible historic role when quoted as saying that “the Balkans produces more history than it can consume”. Historians seem to be in agreement that the quote (apparently made in reference to Crete) was wrongly attributed to Churchill, but its expressivity is too tempting not to bring it to the fore. It says it all. Nowadays, this could be revisited and, mutatis mutandis, the question could be if the Balkan region is producing more external debts than it can really afford?
The current article will strive to give an answer to this question in a regional prospective. The historical evolution will be brought into discussion due to the relevant lessons learned. The case of the foreign debt of the former Socialist Federal Republic of Yugoslavia (SFRY) and its role in the dissolution of the former Balkan state could teach the inheritor states (see map) and other countries in the region too a very relevant lesson. It has been widely discussed that the SFRY’s external debt of $18bn accumulated until 1989 (over 70% of GDP computed according to the IMF-IFS Yearbook 1991), when the dissolution process started, played a major role in splitting the former Yugoslavia. There were of course may other factors at play such as cultural and living standard differences, local history and nationalistic sentiments, various religions, inter-ethnic rivalries, President Tito’s death in May 1980 and loose administrative arrangements thereafter, high unemployment, constant emigration and inequalities of wealth distribution among the seven inheritor states.
Three decades later, the large foreign debts still plague the seven countries resulting from dissolution of SFRY (Bosnia & Herzegovina, Croatia, Kosovo, Montenegro, North Macedonia, Serbia and Slovenia), as presented in the table below.
The Balkans — some key macroeconomic indicators
External Debt EUR bln
Gov. Budget % of GDP
Current Account % of GDP
Debt/ Capita EUR
Bosnia and Herzegovina
Source: Central Banks, IMF, WB, CEIC and Trading Economics as of end-August 2020.
Latest available data for 2019 or 2020. GDP figures for 2020 are projections.
Government deficits are likely to worsen during 2020 due to costs of pandemic.
Turkey is not included in this group despite the fact that its European territory is, without any doubt, part of the Balkans. As Turkey has accumulated a large external debt ($431bn as of end-March 2020), the landscape would have been quite different. Meanwhile, some other countries in the region started to accumulate large external debts such as Albania, Greece, Moldova and Romania. In total the 12 countries owe almost €600bn according to the latest available figures (2019 or end-March or end-June 2020, where available). This led to an average external debt-to-GDP ratio of 86.5% which could easily be considered as characteristic of Highly Indebted Countries (HIC). Like any average, this level could be misleading as it ranges between 23.1% in the case of Bosnia and 176.6% in the well-known case of Greece. It could be easily stated that Greece was saved from an external debt crisis by the European Union (EU) and the international financial institutions (IFIs) in May 2010 (first bail-out) and in February 2012 when a large discount (debt write-down or the so-called “haircut”) of 53.5% was granted by creditors. Even with all these generous measures, the target of reducing debt-to-GDP ratio to 120% by 2020 was not achieved due to many reasons which would deserve a full separate analysis. The restructuring process of Greece's external debt was painful and lasted many years, but the consequences could have been much worse without the proper support of its creditors. The ghost of the former Yugoslavia’s external debt and the more recent struggle of Greece are still haunting the Balkans!
Source: as above
Some other cases are also very illustrative (see graph). Both Romania and Moldova started their transition to market economies in 1990 and 1991, respectively, with zero external debts. Romania promoted a vigorous policy of reducing its external debt which was achieved by March 1989, while Moldova agreed not to participate in the sharing of both assets and liabilities in the aftermath of the dissolution of the former Soviet Union in 1991. However, both countries lost this potential advantage soon during the early days of transition. According to the latest figures published by the National Bank of Romania and National Bank of Moldova, respectively, Romania’s external debt reached a very high level of €111.5bn as of end-June 2020 (estimated at over 50% of GDP, depending on the GDP decline this year) and Moldova surpassed the level of $7.6bn as of end-March 2020 (over 63% of GDP). Albania also increased its stock of foreign debt from €7.6bn as of end-2015 to €8.2bn as of end-March 2020.
With a few minor exceptions, all the Balkan countries accumulated large external debts which could have been otherwise manageable in normal times. The problem is that the world is going through very uncertain times. The commercial war between the US and China is simply unpredictable in the short term. Also, many developed countries, including the EU, have implemented bold monetary programmes of quantitative easing (QE) and keep their interest rates at historical low levels (US: 0-0.25% for federal rate and more recently a very flexible approach of inflation target, UK: 0.10% and the EU: -0.50%) which in the short term may have a positive impact but in the longer term will exacerbate inflation and erode the savings of millions and millions of depositors. Political uncertainties related to elections in the US and the actual exit of the UK from the EU on January 1, 2021 are not helping the world, including the Balkan countries, as the markets will change post-Brexit. And on top of everything, the world and the twelve Balkan countries are going through a pandemic with no equivalent in history and with no immediate end in sight.
The obvious question under such difficult circumstances is what else can these countries do? In the very short term, not that much could be done as the financial costs of the pandemic should be paid, but in the longer term the prudent management of external debts is crucial. All the central banks should have clear strategies on how to control the evolution of debt-to-GDP ratios. Some of them used to warn their respective governments from time to time that they are borrowing too much, too quickly. Such a relaxed attitude will not help. The central banks together with the IMF and other IFIs should structure financial programmes with clearly defined targets for the evolution of external debts. In some cases, sharp restrictions on external borrowings will be needed if future financing crisis are to be avoided, especially in those cases where the debt-to-GDP ratios approach 90-100%. Measures to stimulate domestic savings and an increased flow of remittances from abroad (on which countries are dependent) are overdue.
Coming back to the original question of repaying the increasing external debts, the answer is quite different. The EU countries in this group (Bulgaria, Croatia, Greece and Romania) will benefit from the EU support from the €750bn special recovery fund to fight the pandemic and from other structural funds. As such, with prudence and good management they will succeed to stay afloat. However, for the other countries in the group, it will be more complicated. Like many other times in its tumultuous history, the Balkans will remain at the crossroads of powerful geopolitical interests. Uncertain times lie ahead indeed.
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 indeed of any other quoted institution. The assessment and data are based on information as of end-August 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: