PM Ponta presents new Cabinet

Hellvig, Silaghi and Hasotti are no longer in the new Government and will remain active in Parliament. PDL president criticises the ministers proposed by Ponta, arguing that some of them have been brought to justice. As of today, the candidates for minister will be heard by the specialised Parliament committees.

PM Victor Ponta announced during a press conference held at the Parliament Palace the structure of the new Government, with 20 ministries and six ministers-delegate. ‘We have devised a structure that best answered the requirement of a clearer and more direct responsibility of each member of the Government. We wanted every portfolio on the European Commission to have a correspondent in the Government who should keep that relation,’ the PM said. Over half of them were also ministers in the previous Cabinet.



Ponta II Gov’t must repay EUR 13 bln in four years

Out of the sum that must be repaid to the IMF and EC during 2013-2016, EUR 9.4 bln must be refunded by BNR, from the foreign currency reserve, and the remaining EUR 3.6 bln from the state budget.

The Ponta II government  announced that it will have to repay, in the coming years, the bulk of the EUR 19 bln record-loan taken by Romania from foreign financial institutions, which was approved in 2009 by the PDL-PSD government. In total, according to calculations made by zf.ro, during the four-year governance that begins now the Ponta government must repay EUR 13 bln, which means that each of the 26 ministers of the new cabinet carries a “burden” of EUR 500 M. Of the EUR 13 bln that must be repaid to the IMF and the European Commission during 2013-2016, EUR 9.4 bln must be refunded by BNR from the foreign currency reserve and the remaining EUR 3.6 bln from the state budget. Thus, there should be no constraints related to repaying the sum, but this will weaken Romania’s position in terms of foreign currency reserve. The repayment of the loan taken from the IMF (EUR 13.5 bln – principal and interests) will end in 2016 and the biggest sums – representing approximately EUR 5 bln each year – must be repaid in 2013 and 2014. So far, the foreign currency reserves were maintained above EUR 30 bln and economists consider it would be preferable to keep them at a high level, given the uncertainties present on financial markets abroad.If Romania is unable to attract more European funds and new resources from private external markets, foreign currency reserves can dwindle rapidly. “A first consequence of the rather busy calendar of repayments to the IMF could be the wider oscillation of the RON in the coming years. Thus, the RON may possibly trade in the 4.4-4.7 interval against the EUR, even if the political environment at home will be more stable compared to 2012. Without a rapid improvement of the absorption of European funds, we might witness a decline of BNR’s foreign currency reserve,” BCR analyst Florian Sinca believes.While the Ministry of Finance will have to repay the IMF approximately EUR 1 bln each year in 2013 and 2014, BNR will refund EUR 3.9 bln next year and EUR 3.7 bln in 2014, plus interests. The EUR 5 bln borrowed from the EC must be refunded by the Ministry of Finance starting year 2015, with the first tranche amounting to EUR 1.5 bln. EUR-denominated bonds issued in the local market, worth EUR 1.8 bln, will reach maturity next year, followed by bonds up to a total EUR 0.9 bln in 2014. A failure in increasing the absorption of European funds and stimulating the entry of foreign private capitals may result in the impossibility of financing the budget deficit, pressures aimed at devaluating the RON, even recession, warns Ionut Dumitru, the chief-economist of Raiffeisen Bank and president of the Fiscal Council.Although loans are to be repaid in tranches, the Ministry of Finance (MF) already is confronted by a public debt that rapidly grows each month. Romania’s financing need was and remains high, at an estimated RON 70 bln (some EUR 16 bln). The Treasury has a liquidity buffer that covers the expenses for a 4-month interval, an amount estimated at EUR 4 bln. Next year, the Treasury will have an increased need for RON, as short and medium-term state bonds will reach maturity. MF anticipates that the service of public debt will increase to RON 74.3 bln next year, followed by RON 77.8 bln in 2014, the bulk of the sums being loan repayments. Regaining the confidence of international investors is a priority – and this refers both to investors in RON-denominated bonds issued by the Romanian government and to long-term investors in industry, agriculture or services, the BCR analyst considers.

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