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Gov't suggests amendments to diversify funding tools, including for defence projects
The Ministry of Finance (MF) has suggested to adapt the legislative framework in order to allow access to funding tools for projects of national strategic interest, including national defence and security.
MF has published a bill regulating the possibility for the Romanian government to diversify specific funding tools made available by other governments and governmental entities for projects of national strategic interest, including national defence and security.
Specifically, funds can be accessed, under very advantageous financial conditions, through the FMF (Foreign Military Financing) mechanism offered by the US government to the governments of other states, which calls for amending and supplementing existing legislation to include this type of instrument for financing the governmental public debt.
Adjusting the legislative framework includes providing for the possibility of using specific financing mechanisms made available by other governments and/or other governmental entities, for funding of contracts/procurement agreements/projects of national strategic interest; regulating specific parts related to the development of such financings; securing the possibility that such financing contracted by the government of Romania can be sub-lent to the relevant state-owned companies and/or they benefit from the state guarantee for such loans taken out in their own name, in compliance with the legislation on state aid.
The ministry says that in order to meet the urgent needs of military capabilities, it is necessary to identify and diversify financing tools for the acquisition of military equipment.
Amid the unfolding of miliary acquisition programmes with the US government of a significant impact on the development of military capabilities, in conjunction with the current regional security situation, the US government informed the Romanian side about the possibility of accessing funds, on advantageous terms, through the FMF (Foreign Military Financing) mechanism for financing military procurement contracts concluded with departments/agencies coordinated by the US Department of Defense. Under the FMF mechanism, funds available of up to USD 4 billion are approved for direct loans, with the possibility of repayment in 12 years, after a grace period of one year from the first drawdown, at an advantageous interest rate (close to the interest rates of the bonds issued by the US Treasury to which a margin is added), as well as funds of up to USD 8 billion in loans from the financial markets, guaranteed by the US government. The availability of the amounts changes as loan agreements are concluded with partners.
The ministry says that under a memorandum approved in July 2024, the Romanian government approved the initiation of steps to use the FMF financing mechanism. In order to be able to use the direct loans offered by the US Government under this mechanism in 2024, the signing of the loan agreement between the US Government and the government of Romania has to be completed by September 30, 2024, which leads to the need to expedite the approval of the amendment of Government Emergency Ordinance 64/2007, as explained in the memorandum.