The Finance Ministry and the National Bank of Romania (BNR) decided on Thursday to postpone selling bonds on the US market after a one-week road show through the United States and in London. Romania will therefore wait until price and liquidity conditions improve, so that it can borrow at a reasonable cost of around 6%.
Although assisted by big names like Citibank, HSBC and Deutsche Bank, and despite the political and military partnership with the US, Romania was unable to borrow at a good price even though it did tell the U.S. investors it was constantly reducing its budget deficit, it was on schedule with its agreement with the International Monetary Fund and had had a spectacular 4.4% economic growth in the third quarter.
The one billion dollars were needed to finance the budget deficit and consolidate the strategic cash reserves of the Finance Ministry, especially having failed to borrow as much as it wanted from the domestic market in September and October, because of the high interests.
When Bogdan Dragoi, state secretary with the Finance Ministry, and Cristian Popa, deputy governor of BNR, left for the United States to persuade the U.S. investors to buy Romania’s bonds, the country’s CDS (cost of insurance against default risk) had already jumped beyond 400 points and continued to go up during the road show, reaching 463.
(English version by Loredana Fratila-Cristescu)