Public debt, Sovereign Risk and Sustainable Development of Romania
The rapid increase in the government debt under the circumstances of the global crisis persistence and financial markets volatility raises the need for a new approach of public debt sustainability, including for Romania. Despite more intense contagion effects according to global markets connectivity, the importance of country specificity in the assessment of sovereign risk, which is decisive in dimensioning the borrowing costs, has grown. In the case of Romania, a sharp deterioration of its fiscal framework strength has been observed during post-crisis period, the public debt-to-GDP ratio currently reaching around 40%, thus doubling as compared to 2008. The structural analysis of government debt portfolio highlighted the main drivers of excessive public indebtedness and the increase in refinancing (rollover) risk on short term, which is supposed to overlap with the exchange rate and interest rate risks on medium and long term. Several indicators of Romania's debt sustainability are already on the warning levels edge which requires appropriate policies focusing on economic growth recovery, fiscal consolidation ongoing, increasing capacity of generating budgetary revenues, public debt management improvement. Maintaining the financial stability and the investment grade of sovereign risk are decisive for the development of Romania on a sustainable path.