Romania Says It Has Buffer to Stave Off Any Funding Pressure

(Bloomberg) --

Romania’s finance minister said his country has a sufficient buffer to face any funding or exchange-rate pressure, vowing to shortly reassure markets with yet unspecified measures to rein in the Balkan nation’s deficit.

“We have an optimum size buffer” of foreign reserves, Florin Citu said in an interview from Brussels on Wednesday. “If we need it, we’ll step in the market and use it,” he said, declining to elaborate on the amount of cash available.

Romania’s central bank intervened in the foreign-exchange market to prop up the leu after concerns about the effect of the previous government’s spending spree on inflation and the budget pushed the currency to a record low last month. The European Commission projects that Romania will have the highest budget deficit of any European Union member state this year and next.

Citu said his government plans to unveil cuts in some “lavish” expenditures within the next two weeks, aimed at bringing the deficit down to around 3% of economic output next year. He declined to go into specifics, other than saying that the government doesn’t want to “step too much on the break,” amid a worsening global outlook weighing on growth prospects.

Asked why the government doesn’t simply cancel a planned 40% increase in pensions voted by its predecessors, Citu said “next year is an election year, we have two elections.” He insisted that fiscal policy will cease to be a source of market volatility.

Romania will tap international markets “in the first part of next year” Citu said, as local demand is strong. “I don’t see that much pressure on the funding.”

--With assistance from Irina Vilcu.

To contact the reporter on this story: Nikos Chrysoloras in Brussels at nchrysoloras@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Andrea Dudik, Richard Bravo

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