BNR: the public budget must be urgently overhauled, interest rates exceed the target deficit

The Romanian economy is going through a difficult period, and the effects are being felt directly in people's pockets. The state is spending heavily and paying increasingly more to service its accumulated debts, a context in which representatives of the National Bank of Romania (BNR) have raised the alarm over the state of public finances.

Interest payments exceed the target budget deficit

BNR Governor Mugur Isărescu has warned that economic problems must be kept under control. According to the figures presented, interest expenditure is estimated at 3% of GDP for this year — more than the budget deficit that authorities are attempting to achieve through adjustment measures.

Isărescu stated: "The inherent fluctuations in a market economy, the inherent fluctuations of the economy, must be dampened by macroeconomic policies, not fuelled by them — otherwise the economy tends to move along trajectories that are destabilising for society, all the more so in an international context marked by numerous uncertainties and geopolitical and economic realignments, such as the current one."

The budget needs to be "cleansed" of compromises

BNR Deputy Governor Cosmin Marinescu explained the situation: "Interest expenditure is budgeted in the current budget at 3% of GDP, meaning we are spending more on interest than the deficit we are aiming to reach. The public budget must be cleansed of unknowns and compromises. For example, on the revenue side, fiscal policy must focus on the consistent reduction of the VAT gap, and improvements to the fiscal framework must take into account the essential benefit of fiscal predictability."

A stark warning from a senator

Petrișor Peiu, a senator on the Budget and Finance Committee, offered a more blunt assessment of the situation: "We are just about the only country in recession among all these states that are paying very high interest rates. We are the weak link, and I believe — and we must be honest about this — that there is currently no solution whatsoever to the political crisis. We will be hit by a government or public debt crisis without having a political solution in place. That is the reality."