Romania's Public Finances Strained in 2025: Debt Interest Surges, Deficit Rises
Romania's public finances are under strain in 2025. The share of public debt interest has surged to 5.0% of total expenditures, impacting the overall budget. Interest paid on public debt more than doubled, reaching RON 3.8 billion. This accounts for 6.7% of January's total expenditures. The deficit has also risen to 0.58% of GDP, up from 0.45% in January 2024.
Fitch, a leading rating agency, has downgraded its outlook on Romania's sovereign rating, adding pressure to the budget. The general government budget deficit increased by nearly 40% year-on-year to over RON 11 billion (EUR 2.2 billion) in January 2025. Despite a 2.5% increase in fiscal revenues to RON 24.12 billion, lower VAT and excise duties collected had a negative impact. Expenditures rose by 4.5% to RON 57.75 billion, despite a significant 49% decrease in capital expenditures. Payroll expenditures increased by nearly 20% to RON 14.01 billion, despite the government's wage freeze promise in the budgetary sector.
Revenues contracted by 1.4% to RON 46.75 billion, primarily due to lower transfers from the EU budget. Transfers under the EU's multiannual financial framework (MFF) 2014-2020 plummeted to RON 134 million from RON 2.9 billion in January 2024, with no transfers reported under the MFF 2021-2027.
The increase in public debt interest and the deficit, coupled with the negative impact of the Fitch rating downgrade, pose significant challenges to Romania's public finances. The government must address these issues to maintain fiscal stability.
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