Bermuda Triangle Moves To Romanian Finance Ministry Where Is All The Money Borrowed From Commercial Banks?

Ana Săbiescu

The Finance Ministry earlier this week took a club loan of approximately 1 billion EUR from the top eight commercial banks in Romania after having issued countless Treasury certificates since the beginning of the year to cover the budget deficit. In a childish attempt to conceal the loan, the Finance Ministry asked the banks not to release any details concerning the value, structure or conditions of the loan.

Nevertheless, Robert Rekkers, the CEO of Banca Transilvania, yesterday morning confirmed for a television channel that the Finance Ministry had taken a 1 billion EUR club loan from eight banks to cover the budget deficit. Later on, Rekkers declined further comment on the subject. Unconfirmed reports indicate that Banca Comerciala Romana, BRD - Groupe Societe Generale, Raiffeisen Bank, Banca Transilvania and BancPost are some of the banks that gave the club loan.

"BancPost remains interested in financing the Romanian State in this period. We believe that a rational and efficient increase in public spending can become one of the stimuli that the Romanian economy needs in order to recover," said BancPost President Mihai Bogza. "Further on, we believe that the risk rating of the Romanian State is much lower than the risks associated with financing the private sector, especially considering the current crisis. This said and having banking confidentiality in mind, BancPost does not comment on the existence or nature of transactions performed with our customers," Bogza added.

However, the good news is that the latest loan appears to be a medium-term loan, for two years, which would improve the Finance Ministry"s position as they have only issued short-term Treasury certificates since the beginning of the year and now have to roll them over. "Obviously, the Ministry of Finance will borrow more, because they need one quarter of a billion euro per month on the average to roll over the short-term loans taken before, plus the reserve they need," said Laurian Lungu, Managing Partner with Macroanalitica.

The question would be: where is all the money borrowed by the Finance Ministry going to?

It clearly has not reached the economy. Companies are complaining that the VAT returns owed by the State have not been paid, subsidies to the economy have not been paid, taxes have not been reduced and the First Home Programme is not working. So, where is the money?

Representatives of the Finance Ministry could not be contacted for comment yesterday.

Since the beginning of the year, the Finance Ministry has issued discount bonds and benchmark bonds worth over 47 billion RON (nearly 11 billion EUR). If the Finance Ministry needed 11 billion EUR in seven months, the monthly average multiplied by the remaining months of the year would indicate that another 7.85 billion EUR is needed until the end of the year. "What"s going on right now is ridiculous! We need experts at the Finance Ministry. This is not a fiscal policy, it"s a masquerade," some analysts said.

The Romanian Government has committed to a budget deficit target of 4.6% of the Gross Domestic Product or 24.3 billion RON for this year. The International Monetary Fund has set quarterly budget deficit targets of up to 14.5 billion RON at the end of the second quarter and up to 18.6 billion RON at the end of the third quarter.

Finance Minister Gheorghe Pogea recently said that, half-way through the year, the budget deficit had reached 2.7% of the GDP, in line with the IMF targets.