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BNR's Isarescu: Government sector is the one creating external deficit in its entirety

Inquam Photos / Octav Ganea
Mugur Isarescu

The government sector is the one that creates the external deficit entirely, the governor of the National Bank of Romania (BNR), Mugur Isarescu, stated on Friday at the debate "Pandemic, climate change and society," focusing on the theme of the book of academician Daniel Daianu, while he noted that in 2020 this sector posted a 4 percent surplus.

"What does he say about the pandemic [author Daniel Daianu - editor's note]? He says something like this: we didn't get rid of it. Let's be serious. And he said it when he wrote the articles, in the spring ... We didn't get rid of it and we don't know how much it will cost us in the end. Let's see how we solve it. Let's see how we solve this and the thorny problem of correction, of budget correction. Why is it thorny? Because a correction like this is made in a few good years. And every time there are some electoral interests involved, which is not something that only happens in Romania. But it's just more complicated here because we have the 4-year electoral cycle, and we are close to the end of the electoral cycle, before the elections, there is no correction at all. So we make pro-cyclical macroeconomic policies. And I don't know to tell you how many times the BNR warned how dangerous the pro-cyclical policies are. For we don't even observe the Romanian proverb that says one should buy a sled in summer and a cart in winter. And when elections are here, we're done. When Florin Georgescu was Minister of Finance and Deputy PM we had an external deficit and a budget deficit more than reasonable, extraordinary even, before 2015. But when the electoral cycle came to its end everything was ruined. All the efforts made between 2010 and 2014 for correction were in vain," said Mugur Isarescu.

He underscored that even an equivalent reduction of one percent of GDP in the deficit is very difficult to obtain "because you have to tighten the belt in a way, and you have to see who tightens it, at what level it tightens it, how it tightens."

In his opinion, the payment of the external debt is made in foreign currency and in this way the current account deficit is not reduced, with the solution in this case being the budget correction, confirms.

"To be very clear and I always say that as governor, it is not easy, including considering these political situations, sometimes incomprehensible, and considering the electoral cycle. An electoral cycle that when the four-year period ends, even if we've made an effort, from 30 years of experience I tell you, it hits us every time," Mugur Isarescu said.


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