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Florin Cîţu, Minister of Finance – During his time, the public debt increased from 373 billion lei to 541 billion lei. But there are still the months of October, November and December
It sounds like a joke. But history must be put on the table of any future administration.
If things continue at the pace of today, we will reach more than 55% of GDP in 2022 with public debt, and financing would be increasingly problematic. Therefore, the macroeconomic correction should start in 2021, says the Fiscal Council.
At the end of September 2020, Romania’s public debt reached 451 billion lei, or 42.9% of GDP. In December 2019, the public debt was 373.6 billion lei, that is, 35.3% of GDP.
The Finance Ministry also borrowed 2.5 billion euros from the foreign market on Tuesday, that is, 1.5 billion euros over 20 years and 1 billion euros over 9 years.
Romania’s public debt consists of debt in lei and debt in foreign currency, respectively in euros or dollars. Public debt is different from external debt, which includes only debt in foreign currency, both public and state, and private debt of companies and banks. The external debt reached 117 billion euros.
The Fiscal Council is an autonomous institution, which is called upon to certify / comment on the decisions of the public fiscal authority, but without having any practical power. Regarding public debt, the Fiscal Council’s calculation is optimistic. The Council foresees an increase in Romania’s public debt of up to 55% of GDP by 2022. An increase in pensions, this year by 14%. However, the European Commission sees an almost exponential increase in debt, due to the budget deficit that, instead of being mitigated, as the Romanian government hopes, will increase. The Commission sees a budget deficit much higher than the one advanced by economists (9% of GDP, on average), 10.3% of GDP this year, 11.3% of GDP next year and 12.5% of GDP in 2022 This scenario would lead to an increase in public debt from 35.3% of GDP in 2019 to 46.7% of GDP in 2020 (plus 11.4 percentage points of GDP, equivalent to 130,000 million lei) and to 54, 6% of GDP in 2021. And to 63.6% of GDP in 2022.
It will be very difficult to maintain a debt of this type with budget income of 30% of GDP.
Now the state has to spend because it has nothing to do. And it is essential to spend to support the economy and people’s health.
But the state is not a soup kitchen for everyone. The state must support those who do not have it, but the state will also have to ensure that all the money it borrows today is paid back.
The Fiscal Council believes that fiscal consolidation should start from 2021.
Finance Minister Florin Câţu has a promise: the budget deficit will decline, he believes, to 7% of GDP in 2021, from 9 to 10% of GDP this year. It is possible if the business grows, if budget income increases. It is not possible by cutting expenses. It is difficult, but clear: Romania, in its current economic situation, without roads, without trains, without modern urban mobility, cannot afford the deficits in the UK, France or Germany.
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