Romania’s government borrowing cost reaches fresh 4-year high

Sorin Melenciuc 05/06/2018 | 13:57

Romania’s sovereign 10-year bonds yield, a barometer for the cost of financing in the economy, reached a fresh four years and one month high of 4.895 percent (mid-price or average of the bid and ask prices) on Tuesday, up from 4.85 percent on Monday, amid growing concerns regarding the health of public finances.

National Bank of Romania (BNR) data show sovereign 10-year bonds yields rose to 4.79/5 percent on Tuesday, the highest level since May 7, 2014, from 4.76/4.94 percent on Monday.

Experts say the main drivers behind the rise of bond yields are the concerns about the state of Romania’s public finances, in a global context characterized by a gradual increase in funding costs.

Finance Ministry data showed that Romania’s consolidated budget ran a deficit of RON 6.05 billion – 0.65 percent of gross domestic product (GDP) – in the first four months of this year, compared with a surplus in April 2017.

Total budget revenues rose by 11.8 percent year-on-year in January-April 2018, but were largely outpaced by expenses, which increased by 22.5 percent, raising concerns about the sustainability of public finances.

Experts are particularly concerned about the rapid increase of government’s interest expenses. Official data show that interest expense rose by 56.2 percent during the first four months of this year, to RON 5.06 billion, from RON 3.24 billion in January-April 2017.

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