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December 5, 2022

Foreign debt was about EUR 100 bln by end of 2011

The total Romanian foreign debt was EUR 98.4 bln or EUR 5,000 per capita, at the end of 2011, National Bank (BNR) chief economist Valentin Lazea told a press conference, according to realitatea.net. ‘It is more preferable for a country to attract flows of capital that do not generate foreign debt than flows that generate it. Practically, important flows that do not generate foreign debt are three: foreign direct investment, private transfers and European funds. On the other hand, foreign debt generating flows of capital are created from private or government debt. Of this total of EUR 98.4 bln, after Romania’s accession to the European Union, the foreign debt increased with roughly EUR 57 bln.

Therefore, in five years we borrowed EUR 57 bln and also during those five years the three components that do not generate debt brought into the country about EUR 50 bln’, Lazea said. According to him, the debt vs. non debt generating capital inflow ratio is one to one but debt generating ones unfortunately prevailed in that period (five years). ‘The idea is to find a way to make non debt generating inflows bigger than the other ones,’ Lazea said.

Disintermediation and an adverse international context is what put pressure on local currency, Daianu says

Economist Daniel Daianu told a press conference held by the National Bank of Romania (BNR) yesterday that the national currency feels the effects of disintermediation and of the adverse international context, both putting pressure on the currencies in the region, realitatea.net reports. ‘There are a few drivers of the pressure exercised on the leu. We were assured by big banking groups that they would keep their exposure in Romania, but that is a debatable thing. There is data suggesting exits of funds and there is also data showing that some banks want to bring their assets back to Romania’, said Daniel Daianu. E added the phenomenon was not surprising, being just a part of what in Europe is called disintermediation.‘Disintermediation is not over in Europe and banks encounter major difficulties in better capitalising themselves. They even say that, without the capitalisation they cannot obtain, they cannot grow lending or even keep it under the conditions of the new prudential rules. There is now a terrible war going on for how to enforce the new prudential requirements. (…) It is a depth trend that simply cannot be but sensed in Romania,’ Daianu said. He further noted that the situation in Greece and France augment investors’ aversion to risk. Daianu also said that, whenever the euro zone is in pain, local currencies, including the zloty, forint and leu, are subjected to pressure.On a distinct note, the National Bank of Romania set the official exchange rate at RON 4.4165 /EUR, very close to the all time record low, with the leu withstanding a new wave of depreciation wave which was nonetheless calmed down by the indirect intervention of the central bank, according to Mediafax.

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