Romania's short-term foreign debt fell by over 400 million euros in April against March, and by 4.2% against April 2008, while the private medium and long-term debt climbed by 476 million euros in just one month's time, according to data from the NBR (National Bank of Romania).
The short-term debt volume was therefore down to 20.11 billion euros, while the companies' medium and long-term debt went up to 35.68 million euros, almost 9 billion euros more than a year before.
Compared with the end of last year, short-term debt fell by 9.4%, while medium and long-term debt went up 1.6%. The change in the structure of the foreign debt, with short-term loans declining, while medium and long-term loans rose, was also reflected in April by the rise in medium and long term deposits set up by foreigners with Romanian banks by 161 million euros against March.
These deposits are usually means by which international groups fund their local branches.
Starting with the end of May, the National Bank no longer requires minimum reserves to be held for resources attracted at a maturity of over two years, which encourages turning short-term lines of credit into medium or long-term loans.
Eugen Sinca, BCR economist, says the NBR's decision to cut the required reserve ratio for loans with over two-year maturities to zero could lead to a consolidation of the short term debt and a rise in the medium and long term debt over the next few months.
Such a modification in the structure of the foreign debt would reduce Romania's vulnerability, considering that in late last year doubts had arisen as to Romania's capability to pay the public debt service of an over 22 billion-euro short-term debt in a time of crisis, amid significant revenue declines in the private sector. Additionally, the short-term debt is very costly, with Romania paying 12.7 billion euros in the first four months of the year, accounting for over 80% of the overall foreign debt service.
It remains to be seen if the adjustment continued in May, all the more since the modification of the minimum reserve requirements became effective at the end of the month. At the end of April, non-residents' medium and long-term deposits amounted to 5.36 billion euros, 202 million euros less than at the end of 2008, but 773 million euros more than in April 2008.
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