Romanian MoF should focus on lower expenditures…

..not on higher revenues

The new Minister of Finance, Bogdan Dragoi, presented yesterday his priorities for the length of his mandate. Here are the first three:

• The number one priority is to ensure a sustainable economic growth.
• Another priority is structural funds accession.
•  Until now the Ministry of Finance has focused on bringing sustainability to public expenditures but from now on we will focus on increasing public revenues.

Putting the debt/per capita into perspective for Romanians

Every day we here of more indictors showing that Romanian economy is in better shape than others. To some extent this is true. But as always an isolated indicator does not tell the entire story.

The latest such indicator is total debt per capita. We are told that this indicator shows that each Romanian is responsible for 4570 euros. We are also told that this is the lowest level of debt per capita in Europe. It could be.

Here is what we are not told.  First of all we are not told what is the present value of this debt.  In other words we are not told is the real cost today of this debt which is has maturities up to ten years including all interests.

Another thing we are not told is how much income per capita do Romanians make to pay for this debt. If we take the total income and profit in Romania than we get to an income-profit per capita of 1995 euros. So, those people that have a debt of 4570 euros make only half of that. I guess we have to borrow the other half to pay for the debt. Putted this way the debt per capita does not seem so small anymore.