The debt interest bill is growing faster than the economy, warns the first vice-governor of the BNR
Leonardo Badea, first vice-governor of the National Bank of Romania, recently published an analysis on the state of public finances
Public debt has tripled in six years
Romania has borrowed massively in recent years. The public debt increased from 413 billion lei in 2019 to more than 1,200 billion lei estimated for the end of 2025, says Leonardo Badea. In six years, the state has accumulated three times more debt than it had before. This happens because, year after year, the state spends more than it receives. The difference – the budget deficit – is covered by new loans.
The interest bill exploded
In 2019, Romania paid around 12 billion lei per year only in debt interest. In 2026, the estimate reaches almost 60 billion lei – five times more, warns number 2 of the BNR.
To understand the proportion: 60 billion lei is roughly how much the state spends on health, or how much it represents a quarter of the pension budget. It's money that goes to pay off loans, not to hospitals, schools or roads.
Where do we borrow from?
Romania borrows from two main sources:
Internal – from Romanian banks and the population (through the state securities “Tezaur” and “Fidelis”). The problem is that the banks have reached the limit of what they can absorb, and Romanians' savings are not enough to cover the state's needs.
External – through bonds issued on international markets (Eurobonds). These have the advantage of being for longer terms, which reduces immediate repayment pressure. The downside is that Romania becomes dependent on the mood of foreign investors – if they get restless, costs suddenly rise.
At the moment, external financing has become the main engine: the state borrows net more than 80 billion lei per year from foreign markets, Badea also points out.
The fundamental problem, he says, is that we're growing, but not enough for what it's costing us
There's a simple rule in economics: if the economy is growing faster than the interest you're paying on debt, the situation is manageable—growth “dilutes” the debt.
If, on the other hand, interest rates are higher than economic growth, the debt becomes more and more difficult to carry.
Romania is in a risk zone: we grow based on consumption and imports – that is, we buy a lot from outside. This causes the trade deficit to remain chronic, which worries investors and causes them to demand higher interest rates to lend us money. A self-feeding circle.
What if nothing changes?
High interest rates compete directly with investments. In other words, the more we pay down on old debt, the less money we have for highways, hospitals, or schools—the very investments that could make the economy grow faster.
Badea warns that Romania risks a trap: high interest rates lead to little investment, which leads to weak economic growth, which makes the debt even more difficult to manage.
What is the solution?
The first vice-governor of the BNR identifies two clear priorities:
- Reducing the budget deficit – the state must spend more responsibly, so that investors gain confidence that Romania will not get out of control. Better credit means lower interest rates.
- Changing the growth model – less consumption and imports, more of what we produce. The European funds (PNRR) and the reforms related to the accession to the OECD are the concrete instruments through which Romania can make this transition. See here the full analysis of the first vice-governor of the BNR Leonardo Badea
