Domesticentities consumed 17% of Romania's government funding during the January-July period.
Romania's Ministry of Finance is aiming to increase the population's share of total public debt, marking a shift in strategy for financing public needs. According to the latest data available from the end of April 2025, this trend has intensified over the past few years due to high domestic interest rates and the need to finance public expenditures amid constrained access or higher costs for other sources of funding.
The Romanian government's borrowing from households has been a primary means of financing, with the country maintaining some of the highest interest rates in Europe. This has encouraged household lending and investment in government debt instruments, providing the government with a relatively stable and growing pool of domestic savings, especially as European Central Bank rates have fluctuated and other markets remain uncertain.
This shift in borrowing strategy has significant implications for the public deficit and total public debt. Borrowing from households tends to increase the domestic composition of public debt, reducing foreign exchange risk and reliance on external creditors. However, this borrowing contributes directly to the public debt stock and raises interest payment obligations, potentially impacting fiscal sustainability if debt servicing costs rise alongside high interest rates.
On the positive side, this borrowing can alleviate pressure on traditional market or external financing, possibly moderating the public deficit if cheaper or more stable borrowing replaces costlier sources. However, if household rates remain high, the increased debt burden could exacerbate deficit pressures through higher interest payments.
Recently, the Treasury has launched papers denominated in euros with a maturity of ten years, indicating a continued focus on household savings for financing the public deficit. The Treasury issues government bonds under two schemes, in local currency and euros. The share of households in total public debt exceeded 6% this year, reaching RON 61.6 billion (EUR 12 billion) at the end of April 2025.
The increase in household subscriptions to government papers is due to attractive coupons attached to the bonds. In the whole of 2024, the state borrowed approximately RON 32.7 billion from the population. This year, the Treasury has borrowed RON 28.93 billion (EUR 5.6 billion) from households in Romania.
The trend of relying on household savings for financing is a significant progress compared to previous years, with almost 20% of the financing needs now being contracted from the population, a major leap from the previous figure of less than 3%. This strategy is aimed at securing a stable source of capital for the state.
The Treasury is also tapping households' interest in foreign currency, continuing to issue government papers to households. This move is seen as a step towards diversifying debt sources and supporting the deficit in the short term, while raising total public debt and interest cost concerns that must be managed carefully to maintain fiscal balance.
- The Romanian government is focused on utilizing household savings as a primary means for financing, which has led to an increased share of total public debt held by households, marking a significant shift in the country's finance and business strategies.
- The recent trend of relying on household savings for financing public needs has enabled the Treasury to secure a relatively stable and growing pool of domestic savings, especially as European Central Bank rates and other markets remain uncertain, but it also raises interest payment obligations and potential concerns about fiscal sustainability.
