Rising borrowing costs in Romania due to inflation worries and influences from the regional financial market

Romania's Ministry of Finance has recently adjusted its debt management strategy, aiming to extend the maturity profile of public debt and reduce reliance on short-term bond issuance. This shift comes after a year of political instability forced heavier dependence on short-term borrowing.

According to reports by Cursdeguvernare.ro, the government's borrowing costs across maturities of 2 to 10 years currently range between 7.2% and 7.5%. Notably, Romania's government bond yields in the secondary market for 5- and 10-year bonds have risen to 7.6%.

The rise in yields is significant compared to mid-July levels when the government was sworn in, and it is attributed to rising interest rates across major international markets and inflationary expectations linked to the reforms. The increases in bond yields also reflect both regional market dynamics and domestic inflation pressures following the government's fiscal corrective measures.

Short-term yields on new issuances in the primary market have stabilized at around 6.9-7%, according to the reports. However, it is important to note that no new information has been provided regarding the impact of these developments on the Romanian economy.

The current Finance Minister of Romania, Alexandru Nazare, who belongs to the National Liberal Party (PNL), has been in office since the formation of the Bolojan cabinet on June 23, 2025. Despite higher financing costs, the government is attempting to strengthen fiscal credibility.

In an effort to achieve this, the ministry has significantly reduced short-term issuances in recent weeks and has focused on medium- and long-term financing. The attempt to extend the maturity profile of public debt is a response to the adjustment in the debt management strategy.

It is worth mentioning that the most pronounced increases in bond yields have been observed in medium- and long-term maturities. The rise in yields is a concern for the government as it may affect the country's ability to finance its debt in the future.

However, the government remains committed to its fiscal adjustment measures and is working to maintain fiscal discipline. The developments in Romania's bond market will continue to be closely watched by investors and economists as the government navigates these challenges.

Rising borrowing costs in Romania due to inflation worries and influences from the regional financial market