Finance Minister: Proposed Tax Plan Lowers Borrowing Costs

  The first effects of the fiscal package proposed by the Bolojan Government are visible on the financial markets: borrowing costs for Romania are decreasing, according to an announcement by the Ministry of Finance.   “First Effects of the Fiscal Package Proposed by the Bolojan Government: Borrowing Costs Decrease. ROBOR Falls Below 7% for the First Time Since the Presidential Elections. Good News for Romania on the Financial Markets! Compared to the end of Tuesday, July 1st, Romania is now borrowing at lower rates—by approximately 3 to 15 basis points (bps)—a sign that the tax and levy increases aimed at deficit reduction are being accepted by investors,” the Ministry of Finance announced in a Facebook post.   According to the Ministry, borrowing costs have dropped significantly: For RON-denominated bonds, yields fell by 3 to 15 bps, with the sharpest drops seen in maturities over 4 years. For euro-denominated eurobonds, yields declined by 20 to 35 bps, and even further for bonds with maturities beyond 5 years. For U.S. dollar-denominated eurobonds, the drop was between 15 and 30 bps.   Additionally, the 3-month ROBOR index fell below 7% for the first time since May, reaching 6.99%, the Ministry noted.   “The announcement of the measures package is already having a significant market impact. In today’s domestic auction, we announced an issuance target of 800 million RON and saw demand nearly five times higher, especially for longer maturities over 9 years. The yields we issued at were approximately 5–10 bps below the secondary market, and we awarded nearly 3 billion RON,” said Finance Minister Alexandru Nazare in the statement.   On Friday, the 3-month ROBOR—used to calculate interest on RON-denominated variable-rate consumer loans—dropped to 6.99% per year, from 7.04% the previous day, according to data published by the National Bank of Romania (BNR). At the start of the year, the index was 5.92% but began rising on May 6, two days after the first round of presidential elections, reaching 6.08%.   The 6-month ROBOR, used to calculate interest on variable-rate mortgage loans in RON, also fell to 7.09%, down from 7.13%, while the 12-month ROBOR dropped to 7.19%, from 7.25%.   On Thursday, the Ministry of Finance published a draft law containing several fiscal-budgetary measures, including raising the standard VAT rate from 19% to 21%, increasing reduced VAT rates from 5% and 9% to 11%, raising excise duties, increasing the dividend tax from 10% to 16%, and introducing an additional tax on banks. The draft also includes higher taxes for the gambling industry and the application of social contributions on the portion of pensions exceeding 3,000 RON.