BUSINESS

Direct investments by non-residents down to EUR 211 M

Romania’s medium and long term foreign debt stands at EUR 80.78 bn, according to BNR.

Direct investment made by non-residents in Romania in Q1 amounted to EUR 211 M (compared to EUR 360 M in Q1 2012), broken down as follows: intra-group credit – EUR 213 M and participations to equity consolidated with the estimated net loss with a negative value of EUR 2 M (net), the National Bank of Romania (BNR) said. From the point of view of financing modalities, an important position was still kept by loans – especially in the case of investment in equipment – but a good evolution was also seen in net entries in the form of foreign direct investment by non-residents, the value in euro registered in the non-banking sector growing by almost 40 per cent (variation over the last four months), primarily on the account of a triple inflow of intra-group loans, Inflation Report states. The medium and long term foreign debt was, at the end of March, EUR 80.78 bn (79.9 per cent of total foreign debt), up 2.6 per cent compared to December 31, 2012, according to a BNR release.

The short term foreign debt on March 31, 2013 was EUR 20.30 bn (representing 20.1 per cent of total foreign debt), up 0.3 per cent compared to December 31, 2012. The balance of the foreign debt is calculated on a cash base (exclusive of accrued debt that has not yet fallen due). It also doesn’t include SDR allocations from the IMF. The medium and long term foreign debt service rate was 33.1 per cent in Q1 2013 compared to 33.5 per cent in 2012. The coverage was 8.0 months of import of goods and services on March 31. 2013 compared to 7.1 months of import on December 31, 2012. Also on the debt subject, central bank Governor Mugur Isarescu explained it would be an economic crime to bring foreign debt down to zero, as Ceausescu had done. ‘Some of us remember that, in the 1970s, ten years of prosperity were followed by ten years of repaying the foreign debt‘. It was an economic crime.

The solution for Romania is a manageable debt,’ Isarescu explained. ‘Only a small part of it is public debt. Another part is made up of private sector debt and a third part is generated by the banks that have financed Romanians. When commentators speak of debt they do not usually add these nuances, and the debate may therefore degenerate’, Isarescu added on a seminar discussing Romania’s debt.Also, In 2013 Q1, the balance-of-payments current account posted a surplus of EUR 69 M as compared with a deficit of EUR 796 M in the first three months of 2012, due to the decrease in trade balance and income deficits (by EUR 640 M and EUR 347 M respectively) and to services going into surplus (EUR 153 M, from a deficit of EUR 79 M), according to BNR report.

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