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BNR official: Commercial banks cannot loan more money to the state

Romania has no more room to increase the debt by accumulating budget deficits, given that the maximum level that the local economy can sustain is 40-45% of GDP at the most. The local banking system, the largest financier of the public debt, is already overexposed on state bonds, Eugen Radulescu, director of the Directorate for Financial Stability with the National Bank of Romania (BNR) said on Monday.

“The maximum level of debt that the Romanian economy can sustain is of about 40-45%. This is resulting if we do not consider the fact that commercial banks do not have any more resources to loan more money to the Romanian state. We are on the second position in Europe in regard to the financial sector’s exposure on state bonds, after Hungary. It is a very high level. The banks cannot loan more money to the state, if they do, they would worsen the balance sheet. As of now we should be very careful about the deficit and, although I do not envisage a crisis in 2019, this does not mean a crisis will not come later,” Radulescu said, according to ziare.com.

On the other hand, Romania is at the upper limit of the budget deficit target accepted by the EU, although ‘revenues from the future’ have been collected.

“Public authorities have been very ingenious in bringing revenues from the future to the present, they brought in the dividends. The bringing of dividends forward is not registered as anticipated revenues but, regardless if they are or aren’t, for how long can one bring revenues in advance? One year, two years, and then there will be no more resources,” Radulescu added.

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