BUCHAREST, – Romania may need external funding in the second half of this year, when a large part of short-term foreign debt falls due, central bank chief economist Valentin Lazea said on Thursday.
Many economists have said the European Union state may be next in line to seek financial aid from an international institution, following several of its eastern European peers, as the global crisis cuts off sources of cash.
The risks stem from the private sector, where banks have been lending heavily in recent years, particularly in hard currency, raising doubts over Romania’s ability to continue funding its external shortfall.
“At the moment, we don’t have a pressing need for external financing. The majority of financing needs are in the second half of the year,” Lazea told reporters. He said Romania’s total short-term foreign debt has reached 24 billion euros last year.
President Traian Basescu, which has been wary about the idea of tapping the IMF for help like neighbours Hungary, Ukraine and Serbia, said on Wednesday that Romania may have to get a loan from the EU with IMF supervision. Central bank Governor Mugur Isarescu also said on Monday an EU loan “would not hurt”.
Data released on Thursday showed Romania’s current account deficit widened by 1.2 percent on the year to 16.9 billion euros ($21.85 billion) in 2008. The gap is expected to have fallen to around 12 percent of gross domestic product in December.
Lazea said lowering the gap was the country’s main challenge, stressing that restrictive fiscal policies were “crucial” for an orderly reduction.
“It (current account deficit) can be brought down to below 10 percent given some strong measures by the government to control its own deficit.”
Romania’s centre-left government is waiting for parliament to approve its budget plan for this year that targets a deficit of 2 percent of GDP, significantly down from last year’s 5.2 percent of GDP.
“If the budget is not passed as it is, it will be very difficult to get a loan in the first place,” Lazea said.
So far, Romania’s two largest banks, Austrian Erste’s BCR and French SocGen’s BRD have said their funding to Romania is not at risk of running out.