Romania's external debt increased by 16.5 billion Euros, primarily due to government borrowing, over the span of a year, as of April.
Updated Report: Romania's Ever-Rising External Debt
Romania's external debt soared by a staggering 12% in the past year, climbing to an astounding EUR 158.2 billion, equal to 44.7% of the country's GDP. This alarming figure was revealed by the National Bank of Romania as of April 2025.
The steep hike in the country's external debt in these 12 months financed just above half of Romania's EUR 33.4 billion current account (CA) deficit during the period.
The government sector accounted for 87% of the total rise in the country's external debt, with EUR 14.4 billion, while the private sector only contributed EUR 2.3 billion.
The external debt surge was particularly significant in 2023, when Romania grappled with the hefty cost of energy imports. In that year, the external debt skyrocketed by an eye-watering EUR 26 billion, with EUR 24 billion of that figure attributable to the government. Since then, the annual increase in external debt has gradually eased, reaching EUR 16.5 billion in April.
Several factors played a role in the rise of Romania's external debt:
- The public debt increase significantly contributed to the overall external debt increase. As of February 2025, external public debt reached around EUR 497 billion RON, representing a 1-percentage-point increase in GDP compared to year-end 2024, due to government borrowing needs amidst persistent fiscal deficits and economic dynamics.
- Romania's challenging fiscal situation, highlighted by an 8.65% GDP public deficit in 2024 and a growing public debt-to-GDP ratio (currently at 56.3%), has necessitated increased reliance on external financing, likely resulting in upward pressure on external debt.
- Subpar industrial production (down 5.3% in early 2025) and rising unemployment may have curbed domestic resource mobilization, compelling the country to resort to external borrowing.
- The overall macroeconomic environment, including interest rates, availability of credit, ongoing EU integration, and investment flows, influences external borrowing dynamics, though specific contributions to the debt increase are not detailed explicitly.
The escalating external debt correlated with the substantial widening of Romania's current account deficit, which shot up to EUR 10.1 billion in January-April 2025. This represents a skyrocketing increase of over 60% year-on-year.
This suggests that the larger external debt, in part, came about as a result of financing needs to bridge the growing current account deficit. The deficit expansion could be attributable to factors like increased imports, sluggish industrial output, and external economic conditions.
In summary, Romania's dramatic increase in external debt over the past year can be attributed to government borrowing amid a growing public debt and fiscal deficit, subpar economic performance, and structural factors limiting domestic financing. This surge in external debt helped finance an expanding current account deficit that ballooned in the same period, underscoring growing imbalances in the Romanian economy.
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The growth in Romania's external debt primarily funded nearly half of the country's substantial EUR 33.4 billion current account (CA) deficit during the past year.
The steep rise in Romania's external debt can be linked to the government sector's borrowing needs, as it accounted for 87% of the total increase, with businesses contributing a smaller portion.
